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DAREBIN CITY COUNCIL Commission of Inquiry

David L Elsum AM April, 1997

VICTORIA

INQUIRY

INTO THE

DAREBIN CITY COUNCIL

APRIL 1997

Ordered to be printed

VICTORIAN GOVERNMENT PRINTER 1997

No. 47 Session 1996-97

Inquiry into Darebin City Council

During September 1996 some employees of the Darebin City Council were made redundant. Other employees then went on strike. Some Darebin Councillors criticised the way the redundancies had occurred. The delegations relating to industrial relations matters of the Darebin Chief Executive Officer were withdrawn by the Council while Councillors negotiated with the Australian Services Union to settle the strike. With rising community concern about governance of the City, the Minister for Planning and Local Government spoke with the Mayor ofDarebin. It was suggested that a Mediator be appointed to assist the Council and the Chief Executive Officer.

This suggestion was rejected by the Councillors of the Darebin City Council.

An Inquiry into various matters relating to the affairs of the Darebin City Council was therefore commissioned by the Minister. Mr David L Elsum AM was appointed Commissioner to conduct the Inquiry.

This document reports the findings of the Commissioner.


TERMS OF REFERENCE

TERMS OF REFERENCE NO. l

"Whether since 1 September, there has been a good working relationship between the Councillors of the City of Dare bin and the CEO."

TERMS OF REFERENCE NO. 2

"The circumstances which have occurred since 1 September, which led to the withdrawal and reinstatement of delegations from the Council of the City of Darebin to the CEO in relation to stajjing and industrial relations matters. "


"The action taken by Councillors of the City of Darebin since 1 September, either individually or collectively, which may have had a bearing on the working relationship between the Councillors and the CEO."


"Whether there have been any threats made by the Councillors of the City of Darebin to any person in relation to the employment of the CEO."


"The conduct and performance of his duties by the CEO since 1 September. "


"Whether the affairs ofthe City ofDarebin are being, or have been affected, by any or all of the above matters and, in particular, whether these matters have had, or are likely to have, detrimental implications for the ongoing Council leadership of the organisation and the employment of staff at the City of Dare bin under accepted professional standards. "

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Executive Summary

This Commission of Inquiry is about governance of the Darebin City Council. It concerns the roles of Council, management and the Chief Executive Officer; their inter-relationships conduct, probity and professionalism.

It is not about illegality.

Darebin is a large important municipality; it is home to 125,000 people. Managing such an enterprise requires superior consistent directed leadership. Good governance demands wisdom, integrity, trust, goodwill and high order forward looking skills. This report demonstrates that these qualities are lacking in Darebin City Council.

Darebin City Council was elected in March 1996. Almost immediately a pattern of questionable behaviour commenced. This generated an uneasy working relationship between Darebin City Council and its Chief Executive Officer, Mr Kelvin Spiller.

In September 1996 this was the backdrop to governance of Darebin City Council breaking down. The CEO forewarned Councillors of a redundancy program aimed at reducing :future operating deficits. Initially Councillors agreed but as external pressure grew some Councillors distanced themselves from the redundancy program. Strike action occmTed and Darebin garbage was not collected. Council then purported to remove the delegations of the CEO regarding industrial matters. The Mayor and a Councillor with unclear authority and unclear objectives took over the role of management and negotiated with some of the people made redundant and the associated Union. Strike action ceased but confusion continued.

Council rejected a commonsense proposal by the Minister for Planning and Local Government to appoint a Mediator to assist the Council and CEO move forward. This Inquiry was then commissioned.

There seemed to be some improvement in attitude and behaviour of Councillors during this Inquiry. Unfortunately such improvement has not been sustained. Factional deals, pressures for ad-hoc decisions without management input, involvement of outsiders in important Council decisions, exclusion of some Councillors in important decisions and approval of excessive remuneration for the Mayor occurred during the closing stages of the Inquiry. Indeed the Inquiry was extended as new events unfolded. The behaviour of Darebin Councillors adversely affects the relationship between Council, management and the Chief Executive

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Officer. Satisfactory governance is at risk. Darebin City Council has gained notoriety and needs help. Changes are necessary; otherwise further questionable activity leading to another breakdown in municipal governance and possible illegality, is likely.

This Commission of Inquiry suggests three progressively severe courses of action to the Minister for Planning and Local Government. These are:

• First, revert to the previous commonsense suggestion of a Mediator being appointed. If Council does not co-operate with this or if, after a time, improvement does not result; then

• Second, an Administrator should take over management of the City; and

• Third, if the Administrator does not become confident that Darebin is on the road to establishing a stable healthy governance then the municipality should be broken up and parts of it assigned to adjoining cities.

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Key Findings

Terms of Reference No. 1: Relationship between the CEO and Councillors Page 23

The relationship between Darebin Council and its CEO was poor during September and October 1996. This was detrimental to the good governance of the Darebin City CounciL I find the behaviour of the CEO was satisfactory during this period and that the problems were brought about by the actions of the Councillors.

The "Confidence in the CEO" resolutions of 16 October 1996 settled matters to some extent. The current attitude of most Councillors towards the CEO seems to be one based on professional respect although this may be a lull due to this Inquiry at least in so far as some Councillors are concerned.

Terms of Reference No. 2: Withdrawal of Delegations Page39

Even though fully informed, in September 1996 some Darebin Councillors attempted to distance themselves from a politically and industrially difficult management action. Council withdrew the delegations of the CEO and entered into industrial negotiations thus continuing a pattern of interference with management. This resulted in a breakdown in good governance at Darebin.

Terms of Reference No. 3: Actions by Councillors Page 47

Governance at Darebin and relations between Councillors, CEO and management are adversely affected by factional agreements, the influence of outsiders, the self-seeking remuneration paid to the Mayor, interference in management and the behaviour of Councillors.

The Darebin City Council and some Councillors did not behave appropriately during September 1996.

The period from 2 September 1996 through to early October 1996 was particularly difficult for the CEO, the management team and staff.

Relationships have gradually improved since early October 1996.

The situation is again becoming unstable as this Inquiry nears completion.

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Terms of Reference No. 4: Threats Page 73

Councillor Anderson threatened Mr Spiller' s employment. That threat was conveyed to Mr Spiller by the Mayor, Councillor Royce Keirl Senior.

Councillor Laurence participated in a public radio program in such a way that Darebin Council CEO, Mr Spiller perceived that his competence was being questioned by Council and that there could be a threat to his employment. Such perception was understandable.

Separately, the actions of Councillors Laurence and Anderson contribute to the ongoing instability at Darebin.

Terms of Reference No. 5: CEO's performance Page 78

On balance I conclude that Mr Spiller has conducted himself in a professional and proper manner and applied himself toward achieving good governance at the Darebin City Council.

Terms of Reference No. 6: Affect on Dare bin Page82

The affairs of the City have been adversely affected by the differences between Council and the CEO particularly during the period of industrial disputation.

The return of an elected Council has been difficult for Darebin. At the beginning of this Inquiry there seemed to be an improvement.

I would like to believe that any improvement has been based on the Council's desire to improve governance and maintain a good working relationship with the CEO. This was evidenced by the goodwill and intention expressed at the Councillors' retreat held in Geelong toward the end of 1996. As the Inquiry was extended into 1997 this positive impact was reduced with Darebin Councillors tending to revert back to their previous ways. I suspect that the period of relative improvement was brought about by this Inquiry. The situation is unstable.

Darebin City Council needs help.

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OTHER MATTERS

Many matters affect the governance of a large metropolitan municipality and were encountered in this Inquiry. In the following paragraphs I give edited extracts and page references of important aspects of the Inquiry.

I have found it necessary to include hearsay comments which are credible in the overall circumstances. Some matters have been put in a generalised way in the hope that this report will not aggravate some existing problems.

Page 14

During an Inquiry private discussion with Councillors and management are the most fruitful.

Page 30

Regarding expenses, better definition is required of what is appropriately charged to Council and what is the responsibility of a political party or an individual.

Page34

Governance is adversely affected if the CEO and management have to remind Councillors of their responsibilities and legal authority.

Page35

Newly elected Councillors (through the Mayor) and the incumbent CEO should spend time defining roles~ establishing respective functions and specifYing specific dispute resolution procedures.

Page35

Individual actions of Councillors reflect on the Council as a whole. Occupying public positions requires a higher grade of behaviour to that which is acceptable in a private capacity. It is a responsibility of the Council to influence individual Councillors whose behaviour may be questionable.

Page 49

Potential instability arising from the changeable political emphasis of Councillors does not operate in the best interests of good governance.

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Page 53

Given that the Council is factionalised it would be preferable if all Councillors were open about their association.

Page 57

Non-Councillors are intimately involved with the appointment of the Mayor of Darebin. It would be naive to think that such unhealthy influence does not extend to many important matters at Darebin.

Page 57

Darebin Councillors attempted to hide the truth from me when I discussed the affect of outside influences on them.

Page 59

The office of Mayor is not merely ceremonial in nature. The rewards for occupying the position of Mayor are substantial. When a Mayor is appointed it would help municipal governance if the appointment depended on leadership skills and not political deal making or taking the position in turns.

Page82

Attracting capable staff, particularly at senior levels, is difficult when the reputation of a Council is tarnished.

Page83

If Council as a whole, or Councillors individually, interfere in management, even slightly, then the governance suffers and at times can break down, possibly seriously.

There is uncertainty which flows from the Local Government Act 1989.

Page84

The area which needs to be addressed is the role and behaviour of Councillors. The reforms undertaken during recent years have aimed at management. Unfortunately, the politically more difficult of improving municipal management at the Councillor level has not been tackled as yet. Substantial work and intellectual effort is required. Councillors must accept they are not the State opposition.

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Page 91

Good governance requires much more than that nothing illegal has happened; that is too low a standard. High levels of skill, probity, cooperation and diligence are essential.

Page93

The creation of special purpose Committees by Council is not good practice. Removing matters from the Council to a Committee does not change the nature of the matters being considered. The operation of Committees on detailed matters distract the Council from matters of greater overall importance.

Page 94

The dividing line between Councillors and management needs definition.

Much of this definition can be done by Council and management taking a forthright commonsense approach. The Office of Local Government could work in this area also.

Page 94

A specific area of confusion is that the Council is responsible for approving the management structure while the CEO is responsible for appointing and dismissing staff and directing them. The Council should not have a role in approving the structure; that should be the role of the CEO. The CEO should create a structure which enables Council approved programs to be implemented. The current arrangement leads to ongoing uncertainty and reduced governance.

Page 95

The CEO has to be able to guide Councillors so that, within their perception of needs and approved policy, ongoing management of the City occurs.

Page99

A wider Inquiry than this leading to recommendations for the most appropriate structure for local government in Victoria could be worthwhile albeit politically sensitive.

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Page 100

Councillors should see their role as accepting "overall responsibility for establishing and guiding policies, setting delivery standards and overseeing the performance of management. "

Page 100

Undue attention to detail (by Councillors) creates managerial confusion and larger policy issues are put aside, delayed or confused.

Page 102

A particular officer should be responsible for ensuring that matters raised by Councillors are handled in a proper and efficient way.

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Part 4 of this report is concerned with wider aspects of local governance. The matters covered are:

• Powers of Council • Functions of Council • RoleofCEO • Relative Skills • Dismissal of a CEO; • Memberships; • ''Rats in the Ranks" • Alternative Governance; • Sister City Relationships; • Emoluments, Expenses and Travel; • Remuneration of Councillors; • Councillors on Boards; • Communications; • Role of Council's Legal Advisers; and • Costs.

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Page 99 Page 100 Page 102 Page 103 Page 103 Page 106 Page 108 Page 108 Page 113 Page 113 Page 114 Page 114 Page 115 Page 115 Page 116


PARTl

Documentation and method of approach

In preparing this report the following were created:

• This report; • Attachments to this report; • Archival material • Tape recordings of conversations; and • Transcripts of formal hearings.

This report is in four parts:

Part 1 is this introduction

Part 2 gives background infonnation on the Darebin City Council and its Council.

Part 3 reports directly on each of the Tenns of Reference.

Part 4 is concerned with the wider implications of local governance.

Attachments

1. Chronology of Events 2. Brief Curriculum Vitae of the Chief Executive Officer of the

Darebin City Council, Mr Kelvin Spiller; 3. Legislative Background; 4. Extract from Itinerary of Mayoral visit to Philippines. 5. Typed extract of an agreement between Labor Unity faction and

Labor Renewal Alliance faction dated 21 March 1997.

Approach

In approaching the task my attitude has been that smooth governance of the Darebin City Council should occur during the Inquiry and that, hopefully, a base would be established for stability thereafter. With that intention the Inquiry was conducted and the report written in a more generalised way than if it were an internal study for a corporation.

My Tenns of Reference are essentially about the relationship between the CEO of Darebin and the Councillors of Darebin, as a group and individually. Fairly and precisely identifying then describing such relationship matters is difficult. Some matters have been put m a

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generalised way in the hope that this report will not aggravate existing problems. In my considerations and this report I have attempted to rely on direct evidence given to me. Also I have found it necessary to include hearsay comments which are credible in the overall circumstances.

In 1993, the Honourable Alan Hunt AM made an Inquiry into matters affecting the Shire of Strathfieldsaye. I read that report to seek guidance about procedures for this Inquiry. The following is an abbreviated extract of Commissioner Hunt's introduction at the Open Session held on 1 July 1993:

"I made the decision to conduct the greater part of the Inquiry in private... There would be greater freedom and greater frankness from people who would feel able to tell me exactly what they know or believe. They would know that they have the protection of the Inquiry and know that they could speak without the fierce light of publicity, and that they could not be thereafter victimised by anyone for what they had said to the Commissioner ... They have been universally frank. Many people have acknowledged facts that were not in their interests, and they have given me their opinions freely. I could not have expected the co-operation I have in fact received if I had sought to conduct the inquiry in public. A public Inquiry openly conducted would become a lawyers and media picnic, it would have cost many thousands of dollars per day in legal representation and the numbers seeking legal representation would have increased daily. By the means adopted we have avoided those unnecessary costs which would have been borne by the ratepayers and by individual citizens of the Shire if an open Inquiry had ... "

I found these comments helpful in indicating the way I should proceed with the Dare bin Inquiry. During the Inquiry I strengthened my belief that private conversations were the best way to obtain a fair picture of the happenings in the Darebin City Council. I found that the private conversations helped me understand matters at Darebin to a much greater degree than the public hearing.

Terms of Reference 1, 2, 3 and 5 mention events since 1 September. I have assumed this relates to 1996. During the public hearing on 25 February 1997 it was put to me that I should restrict myself only to events after that date. Mr Mark Hayes, solicitor acting on behalf of Councillors Keirl, Lawrence and Politis, said "Anything said or done before 1 September is totally irrelevant to the Inquiry ... ".

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The difficulties at Darebin did not suddenly occur in September 1996. From the time the Council was elected in March 1996 it immediately asserted itself. Councillor Anderson said:

" ... senior officers ... under the Commissioners had got pretty much used to putting proposals and getting them, and I don 't want to have a shot at Commissioners, but ... .for most of them once the bottom line looked okay then the rubber stamp came down and Councillors are a bit different to that"

Councillor Anderson continued that there is now "a very much clearer idea of where we wanted to head''. This statement is insulting to both the Commissioners and management and indicates an attitude likely to cause problems between the Councillors and management.

Unfortunately problems did occur. Tensions developed during 1996. Management was concerned about the actions of Councillors~ while Councillors felt that the CEO was unduly attached to a style of management which had evolved under the Commissioners. That management style reflected a 'new' approach to managing local government which is akin to that adopted by successful organisations in today's complex world.

The unfortunate breakdown in relationships which occurred in September 1996 grew from this unsettled background. To address the Terms of Reference, I found that it was not possible to restrict myself to events after 1 September 1996 which inevitably grew out of a prior set of relationships. Consequently, to provide balanced consideration I have found it necessary to look at the period prior to 1 September 1996, particularly from the date when Council was elected.

The people I spoke to helped me with matters concerned with the Terms of Reference. Many, however were very anxious to speak about wider issues of municipal governance. I have attempted to mention some of these issues in the final section of this report.

There is overlap in some of the six Terms of Reference. Where this has occurred I have tried to avoid too much repetition although this has not always been appropriate.

Consequently, this report varies in its depth from one subject to another and some repetition occurs. Subjects directly within the Terms of Reference are given more detailed consideration than topics encountered along the way.

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MEETINGS WITH COUNCILLORS

At the outset I intended that the bulk of my work should occur through private discussion with Councillors and management of the Darebin City Council. This proved substantially the case.

Councillors Anderson, Bilias, Donohue, Keirl, Kelly, Laurence and Politis gave me a joint submission which was a useful starting point for my discussions.

I found management and some Councillors readily available and forthright. Some Councillors wrote and expressed co-operation and availability and I made direct requests to all Councillors to meet privately with me. This invitation was taken up by the following with whom useful private conversations occurred:

Cr Royce Keirl Snr (Mayor) Cr Nazih El Asmar Cr Alison Donohue Cr Chris Kelly Cr Steven Tsitas

Unfortunately, the following Councillors were not able to meet me informally. To progress the Inquiry I found it necessary to issue formal summonses to:

Cr John Anderson Cr Matty Bilias Cr Tim Laurence Cr Spiro Politis

Also summoned to appear was the Mayor of Darebin, Councillor Royce Keirl Snr. He was summoned in his capacity of Mayor. He had earlier spoken voluntarily in private with me.

The formal hearing was in public and held on Monday 24 February 1997. I was assisted that day by Mr Murray Mclnnis, Barrister at Law. Crs Politis, Laurence and Keirl were represented by Mr Mark Hayes, a partner of Maddock, Lonie & Chisholm and Crs Anderson and Bilias by Mr Ian Murray, a partner ofMallesons Stephen Jaques.

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Many people spoke with me in person or by telephone. There was rumour and innuendo. There was petty nastiness. Much that I was told was not relevant to the Terms of Reference of this Inquiry but reflected a deepseated concern by many people that the governance of Dare bin is not as it should be. While political considerations caused some of this concern much of it was of a general nature. There were criticisms, often personal, of Councillors and management, both past and present. Feelings nm deep and memories are long at Darebin.

All Councillors recognised that there had been problems at Darebin. I was, however, surprised that the Council seems unaware of the extent of community criticism; some of which is unjustified. A recognition by some Councillors that there are perceived problems at Darebin would have made my task easier. It would also enable Councillors to realistically address problems with municipal governance at Darebin.

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PART2

The Darebin City Council

The Darebin City Council was created by Order in Council on 22 June 1994 when the City of Preston and parts of the Cities of Northcote, Heidelberg, Diamond Valley and Coburg were merged. At that time profound change in the structure of local government in Victoria was occurring. Since then local government officials have been managing in a rapidly changing environment. This change includes:

• physical amalgamations of Councils and consequent formation of new municipalities;

• the transition from elected Councillors to government appointed Commissioners and back to Councillors;

• development of Compulsory Competitive Tendering (CCT); • compliance with government imposed savings targets affecting

rates and/or expenditure; • managing redundancies of staff arising from amalgamation and in

order to reduce recurrent expenditure; • changing the culture of Council organisation; and • changing organisational structures to accommodate the above.

Superimposed on this was and still is a highly charged local political environment surrounding the changes occurring in local government in Victoria. Across a wide political spectrum some people have said that appointment of Commissioners endangered democracy. There seems to be an attitude by some newly elected Councillors, not only at Darebin, that their prime task is to return municipal management to the people. This is used to excuse some activities.

Equally vocal were many ratepayers attracted to the efficiencies and general calm which arrived with Commissioners; they denied that democracy was under threat.

Municipal management, headed by the CEO, is caught in this clash of great forces and events.

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Statistics

Comparative Statistics relating to the Darebin City Council and surrounding municipalities show:

Darebin Moreland Yarra Ban yule

Area(sqkm) 53 51 20 63

Population 125,152 135,459 63,429 118,257 as at 30.6.96

No of ratepayers 54,994 58,426 35,049 45,166 for 1996/97 (a)

Total rates & Charges $34.19m $32.32m $32.18m $26.64m for 1996/97 (b)

Average rates $621.70 $553.18 $918.14 $589.82 & Charges for 1996/97

Surplus( deficit) $9.62m $10.17m $8.03m $7.00m for 1996/97 (c)

Capital works $27.38m $15.11m $10.91m $12.07m Expenditure (d)

Debt as at 30.6.96 nil $13.645m $14.240m $nil

Number of employees 650 589 583 474 EFT as at 30.6.97

No of Councillors 9 10 9 7

Source: Council Profiles prepared by the Office ofLocal Government 1996

NOTES

(a) Infonnation supplied by the Council; (b) Imputed estimates only as 1996197 is a shortened rating period of nine

months. Therefore 1996/97 rates and charges have been amended to reflect the carryover of rates and charges of previous years brought into the 1996/97 budget;

(c) Recu"ent revenue less recu"ent expenditure,· (d) Capital Expenditure includes; capital works, debt redemption and transfers

to reserves.

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Appointment of Commissioners and the Interim Chief Executive Officer

Immediately after the formation of the new City in 1994 three Commissioners were appointed to manage the newly created Darebin City Council. The Commissioners were:

• Mr John Lester (Chairperson); • Mr Brian Baquie; and • Mr Kenneth Dowling.

Mr Kelvin Spiller was appointed to the position of Interim Chief Executive Officer.

Role of Commissioners

Broadly, the duties of the Commissioners included:

• the establishment the new management and organisational structure for the Council;

• the appointment of a Chief Executive Officer; • performance of the statutory functions of the Council; • the development of Compulsory Competitive Tendering for

Council services; • rationalising and reducing costs flowing from the mergers; • the development of a rating strategy; • the development of a Corporate Plan for the Council and • the preparation for the return of an elected Council and

arrangements for the election.

Success

Each of the above was successfully implemented including:

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• the Commissioners approved an interim management structure. • the appointment of officers under contract then commenced. The

most important appointment was that of the Chief Executive Officer, Mr Kelvin Spiller which occurred on 12 September 1994. Mr Spiller had previously been CEO of Preston, one of the merged cities. A description of Mr Spiller's background and experience is given in Attachment 2. The permanent organisational structure was approved in October 1994 and Mr Spiller proceeded with appointment of other key officers.


• using guidelines prepared by the Office of Local Government, Compulsory Competitive Tendering was successfully introduced;

• an overall investigation of all Council services resulted in substantial change and cost savings. There was adverse public reaction from some sectors of the community to Council seeking to outsource some traditional services;

• all staff were centralised in one place at the previous Preston (now Darebin) Town Hall. This left the Northcote Town Hall substantially unused; and

• against this background a new rates strategy was introduced and a rate reduction was achieved of 17%.

Election of Council

Elections for a new Council were held on 16 March 1996 and the Commissioners handed over governance of the City to the new Council. The Councillors elected were:

Name of Councillor Ward Occu_pation Cr Royce Keirl Snc (Mayor) Cazaly Butcher, Safeway

Cr John Anderson Clifton Teach er Management & Communication Skills, William Angliss T AFE College

Cr Nazih El Asmar Rucker Electorate Officer, Hon Theo Theophanous, MLC, Member for Jik:a Jik:a Province

Cr Matty Bilias lames Public Servant, Department of Education Personnel Section

Cr Alison Donohue Spring Electorate Officer, Michael Leighton, MLA, Member for Preston

Cr Chris Kelly Oakhill Home Duties

Cr Tim Laurence Merrilands Commercial Artist Marketing/Public Relations

Cr Spiro Politis Barunah Solicitor, Superannuation Complaints Tribunal

Cr Steven Tsitas LaTrobe Research Officer, Michael Leighton, MLA, Member for Preston

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The following were Councillors in former Councils:

Cr John Anderson

Cr Royce Keirl Snr Cr Chris Kelly Cr Spiro Politis

(Northcote) outgoing Mayor 1993/94 (Preston) (Preston) (Northcote)

It has been claimed that in Victoria there has not been a history of strong politicising of local government. If this is true then the tradition was not followed in Darebin in 1996 where all members of Council were associated with the Australian Labor Party. As discussed later, all Councillors had affiliations with factions of the party.

Information from Councillors

I questioned all Councillors.

Councillors Keirl, Donohue, Kelly and Tsitas, all members of the Labor Unity Faction met with me in private. Of the Left and Pledge Factions, Councillor El Asmar was the only Councillor who saw his way clear to meet with me at first invitation. I thank those Councillors for their courtesy in what was not an easy situation for them.

I issued summons to have Councillors Anderson, Bilias, Laurence and Politis appear to inform me. They had legal representation at the formal public hearing. Having to issue summons and have public hearings complicated my task; it is regrettable that those Councillors did not adopt a more cooperative attitude.

The Mayor was also summoned to appear before me even though he had been entirely cooperative.

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PART3

The Terms of Reference

Terms of Reference No. 1

Whether since 1 September 1996 there has been a good working relationship between the Councillors of the Darebin City Council and theCEO.

EARLY ACTIONS OF COUNCIL

Prior to 1 September 1996 there were a number of Council decisions which affected the way the CEO managed the City and his attitude to the Council.

Immediately after the election Darebin Councillors were keen to assert themselves and implement their election platform. They wanted it to be obvious that they were in charge, that democratic local government had returned and that a symbolic break was made with the time of government appointed Commissioners. While several Councillors told me they had decided to enter office with as little disruption as possible such did not turn out to be the case.

Immediately after the election the CEO suggested a workshop be held. It was proposed that the workshop would inform Councillors of the current status of the City. This suggestion was not accepted. The CEO informed me that he was not given any reason for rejection of his proposal. The assumption is that the Council was keen to show that it was in charge, not the management.

One Councillor told me some Councillors believed that during the time of the Commissioners management had too much influence. Councillors had resolved among themselves to show that they were in charge. The CEO was informed that Council would ask questions and it was his responsibility to answer. He was told that Council had been elected with a well developed platform and the intention was to implement it as soon as possible.

Refusing to attend an informal workshop was an unfortunate beginning to the relationship between the Council and management.

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In the time since then decisions and actions have been taken by Council and individual Councillors which failed to seek the views of the CEO and management or which appeared to ignore or downplay them. Some of these decisions reflected the election campaign platform while others seemed to depend on ideological beliefs, political power or personal aspirations. Some examples of these matters are:

Example 1: Resigning from the MA V

The Council resolved on 29 April 1996 to withdraw immediately from the Municipal Association of Victoria. It ignored the CEO's request to provide information on the administrative implications of such action. On 24 February 1997 Councillors under oath informed me that they withdrew because they did not wish to be associated with government appointed Commissioners.

Example 2: Joining the VLGA

Council resolved to join the Victoria Local Governance Association at a cost of $20,000 per year, without asking for a formal report in relation to the services or benefits that the VLGA would supply.

Example 3: Withdrawing from IRC hearing

At the time of the election the Industrial Relations Commission was considering a dispute between the Australian Services Union and all Councils. On 29 April 1996 the Darebin City Council passed the following resolution on the motion of Councillor Anderson, seconded Councillor Politis:

"THAT The Darebin City Council withdraw instructions to both the .MA.V and VECCI which opposes the ASU application for Award variations.

We provide a letter to the Industrial Relations Commission informing the Commission of our withdrawal of instructions to both the MA.V and VECCI.

We submit another letter informing the !RC of our support to the ASU variation clause to the Victorian Local Authorities Interim Award. "

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Example 4: Organisational review

Council resolved to engage consultants to conduct an "Organisational Review", without giving the CEO the opportunity of seeing the Terms of Reference. These were handed across to the Minute Clerk at the time the resolution was passed. I was told that management believed the Terms of Reference were drawn up in association with the VLGA

Subsequently, the consultant from The Strategy Shop presented his first progress report to the Organisational Status Audit Sub-Committee. At the end of the meeting, the Director Finance and Administration and the CEO were requested to leave the room to allow the Councillors to have a confidential discussion with the consultant.

The CEO said to the Mayor that he was unhappy with the meeting being closed without allowing him to make any comments in relation to matters in the consultant's report. The CEO said the Consultant's report was inaccurate and deficient in a number of areas. The CEO said to the Mayor that this was not the way the Council should be doing business.

Later the CEO was asked to tell the consultant that the Council was not satisfied with his three reports.

Example 5: Northcote Town Hall

A proposal to re-locate Council staff from Preston back to Northcote was under continuing discussion during this Inquiry. I made the following file note on 21 February, 1997.

"Prior to amalgamation, there were about 120 staff at the Northcote Municipal Offices.

Following amalgamation, staff were progressively transferred from the Northcote Office of the Darebin City Council to the Preston Office. Twelve staff remain at Northcote.

Immediately after the election the Council requested the CEO to provide a report on how many staff could be relocated to the Northcote Office. He was told it was the Council's intention to re-staff the Northcote Office.

The CEO was against relocating staff back to the Northcote Office. He was opposed because efficiency would be adversely affected Management difficulties would arise through having two major locations instead of one head office at Preston. The decision had already been made to centralise at Preston during the time of the Commissioners. Councillors did not accept the CEO's recommendation and asked for a

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formal report.

The CEO produced a report showing that approximately 7 5 staff could be relocated The organisation would be less than optimum.

At about the same time on 29 July 1996 management submitted a report to Council which contained a preliminary proposal to lease Northcote Town Hall to a private company with an associated creation of 600 private sector jobs.

At a Policy Committee meeting the motion "THAT Council negotiate with Business Victoria in order to attract this development to Northcote" was moved by Councillor Kelly, seconded Councillor Donohue and LOST on the vote. Some senior Managers detected a feeling of antagonism from at least one Councillor for bringing the matter forward

I was told Council did not consider the proposal because the Council was committed to relocating Council staff back to the Northcote Municipal Offices. Reasons given to the CEO were that commitments had been given at election time and efficiency did not come into it.

During the remainder of 1996 a Working Party of staff investigated the most practical way for relocating staff, re-assessed functions and the number of staff to be moved while trying to optimise the practical operation of moving staff back to Northcote.

In February 1997 the Working Party advised the CEO and Councillors that for practical reasons there would have to be a total of 103 staff relocated to Northcote. Also a majority of managers reporting to the CEO would be moved and the CEO would have a second office at North cote. The total estimated cost of $5.2 million would be split evenly between Northcote and Preston.

As this is written I am informed that the matter is to be reconsidered by Councillors at Caucus meetings on 23 February. It seems the staff relocation is now seen by some Councillors as strengthening the influence of the now minority Left faction concentrated in Northcote. Consequently the decision may be to keep all staff at Preston. The CEO and Council officers are not involved with the caucus meetings. The ultimate decision is scheduled for Monday next 24 February.••

On 27 February I was informed that a decision had been made to remain at Preston. The final decision seemed to result largely from the reduction in voting strength of the Left faction. Information regarding factional voting is given under Terms of Reference No. 3.

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Over many months substantial management resources were used and uncertainty in staff occurred through investigating this project. The issue was not about providing customer service to areas away from the main office. It was about providing substantial Council employment in Northcote and maintaining political influence there. This decision, involving significant capital expenditure, was driven, not by efficiency of management, but by politics and factions.

Along the way an opportunity for a substantial private sector creation of 600 jobs and other benefits was rejected out of hand. Under oath Councillor Anderson played down the job creation prospect " .. advice ... from the CEO wm that no more than 80 staff could be relocated .... space considerations .... we weren't terribly sure how the other 520 would be accommodated, possibly in tiers".

I was told that had the private sector project proceeded the potential benefits were:

• 600 semi-skilled and skilled office jobs; • increased demand for local goods and semces thus creating

further employment; • increased Council rates and leasing revenue; • increase in surrounding property value and thence Council rates; • improved social vibrancy to Northcote; • $1 million expenditure in telecommunications infrastructure at the

Northcote Town Hall; and • increased off street parking to be provided to N orthcote business

area by private investment.

There is no assurance that this private sector project would have proceeded at Northcote. However to decide not to give in depth consideration to the use of the Northcote Town Hall by a private sector organisation lost a significant and important opportunity. In that circumstance there would have been no need to continue pursuing the "make jobs" move to Northcote.

Relationships between management and the Council were tainted by the refusal to consider this possible opportunity on its merits. I understand that Business Victoria's client has not yet decided where to locate. It may be possible at this late stage to see whether there is any chance of resurrecting this proposal which could again be put to the Council.

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Example 6: The Mayoral Ball

The Mayoral Ball was held on 6 December 1996 and was fully paid for by the Darebin City Council. Prior to the Ball the CEO informed the Mayor that he was concerned at the overall cost, especially in light of the circumstances where redundancies had occurred for financial reasons. In any case the City bearing the full cost of the Ball did not seem appropriate. The CEO also suggested that with Darebin "under the spotlight" it would be prudent not to have the Ball funded by the Darebin City Council. The CEO suggested that the Mayor host a Darebin City Council Charity Ball for which invitations could be issued and subsidised tickets sold to invitees. Surplus funds raised from ticket sales could be donated to charities within Darebin. This course would avoid embarrassment at a later stage and result in a more positive outcome for the Council. The Mayor discussed this matter with Councillors and it was decided that the original proposal of Council paying the full cost would proceed.

On 24 February 1997 the Mayor of Darebin, Councillor Keirl was questioned about this under oath and gave confused evidence. He stated that the Ball was a Charity Ball which is incorrect; it was paid for entirely by the Darebin City Council.

I do not suggest that the Mayor was intending to mislead the Inquiry on this matter. Rather I think he did not consider it important or controversial whether or not the Council should pay for the Ball. The CEO's concerns had been handled summarily and the question of cost was not an issue with the Mayor. Such an attitude in my view, is inappropriate. Any conscientious management would be concerned.

I was told that the Ball was seen by some as essentially an ALP function.

Example 7: The quasi-official Mayoral Visit to the Philippines

During the first three weeks of January 1997 the Mayor visited the Philippines. The Mayor told me that the visit was at no cost to the Darebin City Council and gave me a copy of an extensive itinerary titled ''Mayoral Visit to the Philippines". (see extract contained in attachment 4). Subsequently I was informed that the Mayor had sought advice from a staff member (not the CEO) whether he should seek to be reimbursed for Mayoral duties undertaken whilst in the Philippines. No payment was made by Darebin.

Arrangements for the visit were made from the Mayoral office using Darebin staff and facilities. Arrangements in the Philippines were coordinated through Darebin City Council staff. Darebin City Council

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letterhead was used in correspondence. The visit had the characteristic of an official visit with the Mayor and Mayoress being met at airports and transported by staff of municipalities in the Philippines. The three weeks were occupied on visits and functions of a formal nature where the Mayor and Mayoress were received in their official Darebin Mayoral capacity by the Cities ofBacolod, Silay, Bago, Manila, Cavite and Trece Martires.

During the visit the City of Cavite and the City of Bacolod passed resolutions that those cities become Sister Cities with the Darebin City Council. The Mayor, on behalf of the Darebin City Council has sent letters to the Mayors of Manila, Cavite and Bacolod and to business people in the Philippines inviting them to participate in a trade delegation to visit the Darebin City Council.

During February the Mayor made a second visit to the Philippines ''to discuss business co-operation with Darebin". This fuelled rumour; I was told that the Mayor is to receive a substantial fee for arranging for a Melbourne company to construct budget pre-fabricated houses for export to the Philippines.

The Mayor has made arrangements for a trade delegation from the Philippines to visit the Darebin City Council in early April and a further delegation to visit the Darebin City Council in September 1997. It is understood that the trade delegation will consist of a number of Mayors from Philippine cities and could total about 30 people.

The Mayor represented the Darebin City Council in the Philippines, although he did it without official Council sponsorship. Darebin City Council has now to consider becoming a Sister City with two Philippine cities, and will incur some expenditure hosting the trade delegations in the form of functions, staff time, etc.

It is unlikely that the Mayor is experienced in the commercial, representational or protocol aspects of such international activity. In Asia and other countries the position of Mayor carries a much greater influence than exists in Australia. Councillor Keirl has said he used his family connections to gain audience with officials and businessmen in Philippines. It is more likely that his Mayoral title enabled the introduction. It is easy for mistakes and misunderstandings to occur.

The question is raised whether Darebin City Council is acqumng obligations or liabilities from this activity. The 1997 trade delegation to Darebin may produce a worthwhile outcome for the Darebin City Council; that remains to be seen. I was informed that if business does flow from this visit Councillor Keirl expects to receive a fee as an intermediary. It is a matter to be considered whether any such fee would belong to the

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Darebin City Council.

There was extensive use of Council facilities in arranging the visit with secretarial assistance and travel arrangements being provided by Council staff. However the visit was not part of a Council program being directed by the CEO. This type of activity is away from the business of the Council and is distracting for management and staff. It inevitably creates an impression that Council facilities are being used to fulfil personal aspirations.

There was no prior approval from the Council for the visit. Councillors seemed to adopt an attitude that it was no concern of theirs. Darebin's name was being widely used.

I do not suggest that there was anything secretive or underhand about the Mayoral Visit to the Philippines; quite the contrary. The Mayor worked hard during the visit there and attended many functions with civic and business leaders. From one viewpoint such entrepreneurial activity is commendable. Councillor Keirl is proud of the arrangements he made and optimistic about the outcome. My difficulty is the confusion of private activity with public office. Such confusion affects the relationship between Councillors and management.

There is a fundamental misunderstanding of the proper use of Council facilities at Darebin. Such misunderstanding is deep seated and long lived in the cities which now comprise Darebin. I was informed that for many years there was open use of Council facilities for political meetings and functions with accommodation and refreshments at Council cost.

Currently there is an improvement. However a clear understanding of what is appropriately charged to the Council and what is the responsibility of a political party or an individual seems to be confused.

Example 8: Letters from Councillor Laurence

Between 17 October and 3 December 1996, twenty letters were sent by Councillor Laurence to the CEO. Some letters concerned the minutiae of Council management while others concerned deeper and more serious matters. The dates of the letters were:

October 17,24 (two letters), 31; November 1, 4 (six letters), 7 (three letters), 14 (four letters), 15; December 3.

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The content of most letters may not have been unreasonable. It is the volume that is of concern. It worried the CEO. If there are a large number of problems at Darebin then obviously this is an indication that management is defective. Councillor Laurence has not directly made this allegation. Some of the letters relate to detailed Ward matters; Councillor Laurence said he finds it convenient to write direct to the CEO in separate letters. Other letters were much wider:

7 November 1996letter:

" .... What is clear to me, and has been for some time is that the only destabilising issue in Darebin is in fact the Minister's continued threats"

" .... People now perceive the Minister's Inquiry as simply a pretext for "looting" Darebin of it's cash reserves to bail out Yarra. Ratepayers are likely to get nasty at any intervention by the Minister as long as they percieve (sic) it as a grab for their cash reserves. What do you think Council can do at this point? Should the Mayor issue a statement?"

" ... .It is very regrettable that this kind of speculation is being allowed to distress staff at Darebin and the community at Darebin. Unfortunately it is unlikely to stop as long as the ''Minister's spokesperson" and the Premier keep fanning it".

15 November 1996 letter:

" .... public relations should be handled in a more professional way."

He admonishes Spiller for saying he (Spiller) will make his own judgement about when to speak with the press.

" .... As a public relations professional I would suggest that that is not a wise decision. I have absolute confidence in our corporate relations staff and I suggest that you rely on them. "

18 November 1996 to the Mayor about Compulsory Competitive Tendering (CCT) with copies to the CEO, Councillor Tsitas, the Director, Corporate Strategy and the Manager, Competitive Tendering:

"I have in the past given the CEO 'the benefit of the doubt"'

''But it is most worrying that the CEO doesn't appear to understand the Council's position on CCT. .. ...... .it would be appropriate to arrange a briefing session for him to explain to him Council's position and give him some of the general policy background in relation to both Labor Party policy and the challenge to local elected Councils. Although I really

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thought that the Hon Pat Power MLC covered a lot of this subject when he spoke at Darebin Council earlier this year. Was the CEO present at that meeting? Perhaps the VLGA could help the CEO with further information.

You may wish to clarify the issue of Council's position on CCT with the CEO directly, or if you believe it is necessary I can move a formal motion at Council to clarify our position and put a briefing mechanism in place for the edification of the CEO. "

I was given a sinister interpretation of the letter writing. It was suggested to me that there was to be an orchestrated campaign to deluge the CEO with detailed management problems. At a later date some of these details would be listed as a means of criticism and a reason to replace the CEO. On balance I find this assertion was credible but not proved.

The most favourable conclusion I can make is that Councillor Laurence showed a lack of judgement in sending such a volume of mail in such a short time. It would have been helpful if he had prepared the way with the CEO by establishing the way he wished to communicate.

Questionable Events and Practices

The above examples are chosen largely because they stand alone and hopefully will not lead to ongoing recrimination. During my investigations I identified a number of events and practices which in an overall sense are questionable and probably undesirable. They are indicative of unsatisfactory governance and affect the working relationship between Council and management. The list is in no way exhaustive. Indeed each day I spent on the Inquiry seemed to uncover yet another anecdote suggesting something untoward. Indeed, the Inquiry was extended day to day, week to week as Council appeared to indulge itself. I now list some of these matters:

Already mentioned:

• councillors refusing to hold a briefing Workshop after election; • Darebin resigned from the MA V and joined the VLGA without

documentation or hearing the views of management; • summarily withdrawing from the IRC hearing; • organisational review; • relocation to the Northcote Town Hall; • Mayoral Ball; • Mayoral Visit to the Philippines; and • letters to the CEO from a Councillor.

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Other questionable events include:

• the purchase of the Mayoral car (three cars since the 1996 elections);

• direct dealing of Councillors with staff without knowledge or agreement of CEO;

• directions given by Councillors to subordinate staff; • complaints about the Mayor personally admonishing sports

people and threatening to have them removed from a sports field; • agreement by the Mayor for payment of part of Mayoral

allowance to a political party; • loose talk by a Councillor about the CEO Mr Spiller applying for

a position in another City. This unsettled staff Mr Spiller assured me there was no basis to the rumour;

• rumours sourced to Councillors about replacing the CEO; replacement names were suggested;

• Councillors working in offices of State and Federal politicians; • Councillors caucussing before meetings; • non-councillors meeting semi-formally (even regular caucussing

was suggested) with Councillors on matters being considered by Council;

• claims that Council felt forced to let cleaning contract to a particular company;

• a Councillor during an official Council inspection of street cleanliness seen to throw litter into the gutter where it remained until the next storm;

• complaints about behaviour of some Councillors at a Canberra seminar;

• unauthorised supply of a confidential and incomplete report from the Audit Committee to the local press;

• a Councillor treating with contempt the Council policy regarding payment for reinstatement of driveway crossings;

• Council money being spent on a school premises; and • complaints that a Councillor obtained favoured treatment for a

local Football Club with which the Councillor is associated.

During the time of Industrial Disputation:

• withdrawal of the delegations of the CEO; • the Mayor and a Councillor entering into direct negotiation with

branches of the Australian Services Union; • Councillors speaking on radio; • meeting without knowledge of the CEO of the Mayor with

officials of VLGA about the strike at Darebin; and

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• the refusal by the Council to accept suggestion of appointment of a Mediator.

During the course of this Inquiry:

• the unannounced proposal at a Council meeting for the Darebin City Council to acquire an expensive property without informing management or requiring a cost/benefit report or justification;

• the preliminary suggestion of a Mayoral visit to Japan to attend a world meeting of Mayors;

• continuing public feuding between father and son, the Royce Keirls Senior and Junior both of whom have occupied the Mayoral position;

• discovery of a formal agreement between some Councillors and people external to Council regarding the appointment of Mayor; and

• Mayoral remuneration

In isolation most of the above items are petty. In total they indicate the difficult environment and continuing unsatisfactory governance at Darebin. No item is illegal. It is rather that as a group they indicate doubtful governance. They create tensions between management and the Council with management often in the position of ensuring untoward action does not occur.

Management and staff rely on their employment for their livelihood. It is not easy for the CEO and management to remind and/or advise Councillors of their responsibilities and legal authority. Indeed if the need for reminders arises frequently the CEO can be seen to be a bureaucratic whinger. If this feeling develops and continues the CEO can withdraw and become compliant or on the other hand co-operation between the Council and the CEO deteriorates or fails. Either way governance suffers.

If behaviour as reported above continues at the Dare bin City Council there is a serious risk that unacceptably bad administration then illegality will develop.

Establishing Protocols

I have said above that it is difficult for staff to remind Councillors of their responsibilities. Similarly it is difficult for Councillors to express unhappiness with a particular situation if dissatisfaction must be treated in a highly formal way.

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Inquiry into Darebln City Council

I spoke briefly about this with Councillors and management in other municipalities in Melbourne. Prima facie there was no obvious factor which applied to Darebin which caused disruption while the others were settling down.

One common factor which contributed to stability and which Darebin lacked, which I believe important, was uncovered. The newly elected Councils (usually through the Mayor) and the incumbent CEO spent a lot of time defining roles; establishing respective functions; specifying specific dispute resolution procedures between Council and management This did not happen at Darebin. Indeed the refusal by Council to attend an initial Councillors' workshop was a damaging and foolish beginning.

Personal Behaviour

Darebin Councillors should remind themselves that their individual actions and reputations reflect on the Council as a whole. At all times they are in the public eye and face a critical environment For example, it was brought to my attention that the behaviour of some Councillors at a Canberra seminar had been criticised. The complaints were petty and probably reflected unfairly on the individual Councillors. The Councillors felt they had not received fair treatment Fair or not, minor incidents can bring discredit on the Darebin City Council.

Councillors seemed not to understand that public positions require a higher grade of behaviour to that which is acceptable in a private capacity. A look at the above list indicate that Councillors have taken actions which affect the reputation of the Darebin City Council held by the world at large. Darebin Councillors should realise that their personal behaviour and attitudes have this effect Even at the formal hearing there was minor incident regarding the behaviour of a Councillor. It is a difficult responsibility of Council as a whole to be aware of those actions of individual Councillors which may affect the public perception of the Council. Even more difficult is it for Council to influence individual Councillors whose behaviour may be questionable.

Matters of the type described above set the foundation for the CEO and management to fear that Council does not recognise the separate roles of Council and management This concern is magnified if a belief develops that the Council is driven by ideological or other considerations rather than the sound governance ofDarebin and its consequential welfare.

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The Industrial Dispute

At the beginning of September 1996 the CEO was wary, perhaps overly so. On 2 September 1996 a "Discussion & Information Session" was held with Councillors to inform them of a proposed redundancy program. All Councillors (except Councillor Laurence who was absent) gave their agreement. The speedy implementation of the decisions made at that meeting triggered a public deterioration in the relationship between the CEO and the Council. The details of this are given under Terms of Reference No. 2.

The relationship reached "rock bottom" during the six week period 2 September to 10 October 1996.

During the period of industrial disputation the Mayor lacked the skill to hold a common line. It is understandable the Councillors would feel pressured by a decision to make employees redundant. When those pressures manifested themselves by Councillors disassociating themselves it was essential for the Mayor to publicly back the CEO and hold matters together.

This was not done. Instead the Council purported to withdraw the delegations of the CEO and the Mayor and a Councillor entered into direct negotiations with Australian Services Union and the employees who had been made redundant. Reinstatement of some people who had left then occurred. While a partial solution to the current problems was found and the industrial action ceased, the Council's actions caused confusion and undermined the authority of the CEO.

The conduct of the Council and of particular Councillors was inappropriate. Particular criticism is made of Councillor Anderson for a threat made by him and of a public radio interview given by Councillor Tim Laurence. The threat by Councillor Anderson is dealt with under Terms of Reference No. 4

On 15 November 1996 Councillor Laurence wrote to the CEO describing himself "As a public relations professional". It is therefore difficult to understand Councillor Laurence's motivation in giving the type of public radio interview which occurred in the later part of September 1996.

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Councillor Laurence was interviewed by Mr Bill Hartley on radio station 3CR This was just when serious industrial disputation at Darebin was being sorted out. The responsibility of all Councillors at that time was surely to work together to find a fair solution. Councillor Laurence's action did not help a solution be found. The disquiet of public and employees increased and the reputation of the Darebin City Council was tarnished by him commenting adversely on governance at Darebin.

I quote Councillor Laurence from the interview:

"There's a number of faulty processes in this restructure at Darebin. " "He {Spill er) ... acted ... without a properly constituted meeting {of Council). Now that really alarms me, as an elected representative, and I know it has been raised in State Parliament. "

Mr Hartley asked whether:

«the Council can reconcile with the chief executive without the chief executive trying to obstruct what you 're doing"

Councillor Laurence replied:

" ... I'm concerned that the chief executive still doesn 't understand the platform that we were voted in on. "

Further extracts from this interview are given under Terms of Reference No. 4; Threats.

During the formal hearing on 24 February 1997 Councillor Laurence conceded that he regretted some parts of the interview, particularly those dealing with legal matters related to Industrial Relations. Councillor Laurence stated he was not knowledgeable about Industrial Relations. He said he was upset at the time and emotionally attached to some staff. When questioned by Mr Mcinnis of Counsel he said he was inexperienced in giving radio interviews. This statement is readily believable. However it is difficult to accept that Councillor Laurence, as a public relations professional, was unaware of the impact that his words might have. Naivete does not excuse the inflammatory nature of the interview.

On 16 October 1996 a Special Council Meeting was held which expressed confidence in the CEO. This was a positive and useful step.

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CONCLUSION - Terms of Reference No. 1: Relationship between the CEO and Councillors

The relationship between the Darebin City Council and its CEO was poor during September and October 1996. This was detrimental to the good governance of the Darebin City Council. I find the behaviour of the CEO was satisfactory during this period and that the problems were brought about by the actions of the Council.

The "Confidence" resolutions of 16 October 1996 settled matters to some extent. The current attitude of most Councillors towards the CEO seems to be one based on professional respect although this may be due to this Inquiry at least in so far as some Councillors are concerned.

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The circumstances which have occu"ed since 1 September 1996, which led to the withdrawal and reinsllltement of delegations from the Council of the Darebin City Council to the CEO in relation to staffing and industrial relations matters.

Prior to 3 September 1996

At the 1996/97 Budget Meeting in June 1996, Council was presented with the projected shortfalls for the three financial years commencing 1997/98, and a graphic presentation of the expenditure and income from the year 1990 through to the year 2000 and an overview of the 1997/98 financial situation including reasons for shortfalls. Details were also presented to Council regarding financial presentations made to the Union Consultative Committee and staff. These presentations were initiated in an attempt to provide staff throughout the organisation with an overall view of the financial position.

Consequently prior to September 1966 the CEO had made the Council aware that there were some financial difficulties to be addressed. On 2 September 1996, all Councillors (except Councillor Tim Laurence) met with the CEO in a briefing session to hear his proposals.

The CEO reminded the Council that while the immediate financial situation was sound, problems were coming in the years ahead. Operating deficits looked likely in coming years and early action was desirable.

Mr Spiller explained that he had examined the way management was structured and believed that substantial savings could be obtained without adversely affecting programs. He distributed a document, setting out details which included a redundancy program. After some discussion on detail all agreed with the proposed action whereby 13 people would be made redundant the following day and 5 current vacancies would not be :filled. It was estimated that a reduction of $1,050,000 in annual expenditure would occur.

I was told all Councillors disliked redundancies. However, the fact that they were to occur among management rather than among lower level staff made the redundancies more palatable.

On the following day, 3 September 1996, staff who were being made redundant were advised at very short notice.

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It was the speed of implementation of the redundancy decision rather than the actual fact which seemed to lead to subsequent problems. The events described above were documented on 10 September 1996 when the CEO arranged for the Mayor to write the following Memo:

"This memo confirms my previous discussions with you in relation to the presentation of your memo dated 2 September, 1996, and titled Organisational Staff Structure -Review (copy attached) and verbal report presented to Councillors at the Discussion & Information Session on 2 September.

It is also noted that during the course of the discussion Cr Anderson raised a concern about the Landscape Architect's position and asked questions in relation to the carrying out of the Greenstreets program. Cr Politis also raised some concern about maintaining the profile of the Ethnic Services Liaison program. You indicated that you would ensure both of these matters would be covered in the restructure. Cr Anderson said he supported the proposed action, subject to a review of the Landscape program at a later date.

After considering the contents of the memo and the additional verbal information from you, that the redundancy for the position of Director, City Planning & Policy would take effect immediately as from 5.00 pm Tuesday, 3 September 1996, along with the majority of other positions to be made redundant, the matter was moved by Cr Anderson, seconded by Cr Kelly and put to the vote. My observation of the vote that was carried, was that it was a unanimous decision of the Councillors present at the meeting (8 in total, as Cr Laurence was not in attendance) to support the proposed action as outlined in the memo and additional verbal information as indicated above.

Immediately after the vote was taken, I indicated that it was a unanimous vote (which was in support of the written and verbal action proposed by you) and that if any Councillor had any objection to that, then they should say so. No objections were raised.

I have discussed this matter with Councillors Donohue, Kelly and Tsitas and they agree that these are the facts and that they voted to support the action taken.

The subsequent action taken by you has been in accordance with your memo and verbal advice and the decision voted on by Councillors. "

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All Councillors informed me about the events of 2 and 3 September 1996. In retrospect:

• all agreed that the redundancy program might perhaps have been handled more sensitively;

• one Councillor said it would have been better if days rather than minutes had been available to study the briefing paper;

• several Councillors said the briefing was at night and the community implications did not sink in until following days;

• another suggested that agreement had been given on the basis that the redundancies would follow a different well-defined path so that the matter would have proceeded more smoothly; and

• I was told that Council should not have proceeded at that time but should have waited until the annual budgets were being prepared.

The above suggestions were put to me in a responsible manner but no-one felt confident that the difficulties could have been avoided. Redundancies and retrenchments are always difficult and wisdom after the event is common. I was given no concrete suggestions about ways to avoid public concern during such a process.

Darebin presented to me as an area with long-lived and close connections between the community. elected Councillors. Council employees and State politicians. All members of Council proudly and quite properly described themselves as a "Labor Council". It is therefore understandable that redundancies might cause more angst than normally occurs with such an unpleasant happening.

Council was adequately briefed on the redundancies. After the event it is obvious that a longer period might have been given for Councillors to be told about and understand the process and its implications. I make this statement with some misgiving as the possibility is that. matters being as they are in Darebin, any advanced period of notice would have resulted in Council attempting to frustrate or circumvent a legitimate decision of the CEO.

I spoke at length to the CEO about the process which he used to cany out the redundancies. He said that in the previous two and a half years he had overseen 260 redundancies. It was an unpleasant but essential part of the reform of local government in Victoria. Obviously many of the people being asked to leave suffer substantial unhappiness. From his experience, the CEO was quite sure that those people being made redundant suffer even more stress and trauma by remaining in the organisation after being told of the decision.

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Also, staff working with employees to be made redundant suffer high stress, along with the supervisors and management. Mr Spiller said that work would have almost stopped until those people made redundant did in fact leave. Finally he was concerned that there was a possibility of malicious damage occurring if any delay was permitted.

Whilst at first glance immediate redundancy might seem harsh it was in fact the kindest way for the process to occur, he said. However, with hindsight, he would have given one or two weeks notice, as productivity had in fact suffered more than if work had stopped in a number of the areas for the two week period.

It was not put to me that there is any formal requirement for a longer period of notice. I was told that the spirit of the Award is that a longer period of notice should be given. It is however not uncommon for the redundancy payment to cover the longer period of notice. This allows both employer and employee to proceed.

Passing over the short notice, employees who were made redundant were fairly treated including being offered standard redundancy packages and counselling. Outplacement assistance was offered to all employees made redundant, along with a personal crisis and counselling support service for employees and their immediate families, through the Council's Employee Assistance Program.

I now conclude:

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• it is a normal responsibility of a CEO, and within his power to make redundancies in the interests of good governance;

• because of the sensitivity of the issue full and adequate information was given to Council by the CEO about the proposed redundancies prior to them occurring;

• Councillors unanimously understood that a redundancy program was to be implemented. Statements that the agreement was not at a formal Council meeting presented to me as excuses after the event;

• the CEO proceeded in the belief that he had the agreement and support of Councillors;

• more advanced preparation of Councillors may have been wise; • to this point the behaviour of both Council and CEO regarding

the proposed redundancies had been correct.


After 3 September 1996

It was after the 3 September 1996 redundancies that the situation deteriorated:

In the face of the Mayor's memorandum quoted above some Councillors were publicly and privately distancing themselves from the unanimous decision of the eight Councillors at the 2 September 1996 meeting.

Obviously their comments were newsworthy and obtained substantial local coverage thus endangering the good governance and reputation of the Darebin City Council. Press articles dated 11 September 1996 included the following:

"Some Councillors said they believed the redundancies had gone too far."

"Darebin Council has been "guued" by a decision to make 18 positions redundant".

"last week's restructure of Council had taken the organisation back years."

"A split is emerging in the ALP Darebin Council over recent redundancies. Some Councillors have expressed deep concern at the handling of 14 senior redundancies last week. "

"Councillors are furious the decisions were implemented so quickly. "

One Councillor said "that as an ALP Councillor he could not suppon the process which had been followed last week. "

Another Councillor said "there was no detailed discussion with Councillors about the restructure."

A funher Councillor said "he was not happy with the action, which had not been endorsed or decided upon by the Councillors. "

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Then the following occurred:

• the Australian Services Union became involved; • there was press comment with leaking of confidential information; • a number of work bans were imposed, including a ban on collection

of street litter bins; • an application was made to the Industrial Relations Commission to

hear the case in relation to the redundancies and a number of claims by the Union, which were being discussed with management;

• outsiders intervened including a State politician and a Councillor from a neighbouring municipality;

• Councillors were publicly abused by their constituents; • proper administration began to deteriorate; • a rift developed between the Councillors and the CEO; • later, Councillor Tim Laurence (not present at the briefing meeting)

spoke on radio with Mr Bill Hartley in terms which were inflammatmy and irresponsible.

Against this public crisis the following occurred:

DATE INFORMATION

16 September Special Meetings of Council at which the CEO's delegations in relation to staffing and industrial matters were withdrawn.

17 September Mayor and a Councillor negotiate with the Staff Shop Committee and Union officials in relation to the bans imposed and other general industrial relations matters.

20 September Reinstatement of delegations to the CEO.

I was told delegations were withdrawn because the Council was uncertain regarding the limits of delegation and withdrawing them was the only way to clear up the matter. I have a different explanation.

I suggest the delegations were withdrawn so that Councillors could directly control the process and make their political peace with powerful entities outside the Darebin City Council. I am led to this contention by the motions approved by the Darebin City Council at its Special Council Meeting on 16 September 1996. There are 12 separate sub-parts to the motions including the one withdrawing delegations. They include:

44


"1 (a) Council does not endorse a redundancy process that does not comply with the letter or spirit of the relevant Award and Enterprise Agreement;

1 (d) Council engage a consultant to review the organisational structure and resultant redundancies;

1 (g) a payment be made to each redundant employee who does not accept a re-instatement offer;

1 (h) a re-instatement offer be made on behalf of Council to all employees made redundant who are not under contract".

These resolutions are not about clarifying delegations or sorting out roles. They are a direct takeover of the CEO's functions.

These bad decisions then led to confusion. Council, having withdrawn the CEO's delegations, neglected to decide formally who should have the power to negotiate on its behalf. It seems there was some form of general agreement or understanding that the Mayor and Councillor Donohue (and possibly another Councillor) should take over the negotiations. Any such agreement was not formally recorded nor was there any specification of matters to be covered or their limits. This confusion still existed in the mind of Councillor Keirl when he gave evidence under oath.

He denied negotiations had taken place. He made the absurd statement that only discussions took place. This is plainly wrong as shown by the 17 September 1996 Council resolutions:

Moved Councillor Anderson, seconded Councillor Donohue:

"THAT Council resolve to accept the agreement negotiated by Cr Donohue as negotiated', and moved Councillor Anderson, seconded Councillor El Asmar, "Council record appreciation for negotiations with the Union and work done by Cr Donohue in resolution of this dispute."

Confusion continued after Council employees returned to work. Management subsequently found that the there were differences in understanding between Union officials and Councillor Donohue about what had been agreed.

45

Inquiry into Darebin City Cmmcil

Council made the following mistakes:

1. withdrawing the delegations of the CEO; 2. unilaterally approving revised redundancy payments and re

instatement payments without managerial advice; 3. neglecting to specify and approve who should negotiate on behalf of

the Council, and what should be negotiated; and 4. acquiescing in the Mayor and a Councillor taking over a

management responsibility by negotiating with staff and the Union.

These four actions reduced the authority and reputation of the CEO in the eyes of staff and the world at large. Prima facie a withdrawal of delegations breaches the CEO's Employment Contract; he is not able to manage if delegations are withdrawn.

Such action also appears to contravene the spirit if not the letter of the Local Government Act 1989 in relation to the CEO's role as CEO and his responsibilities in relation to the employment and tennination of staff and industrial matters.

The CEO's delegations were restored on 20 September 1996. I was told by Councillors both privately and under oath that the reinstatement occurred because the crisis had passed. My belief is otherwise. It came about as a result of the Minister's office contacting the Mayor.

CONCLUSION - Terms of Reference No. 2: Withdrawal of Delegations

Even though fully informed, in September 1996 some Darebin Councillors attempted to distance themselves from a politically and industrially difficult management action. Council withdrew the delegations of the CEO and entered into industrial negotiations thus continuing a pattern of interference with management. This resulted in a breakdown in good governance at Darebin.

46



"The action taken by Councillors of the Darebin City Council since 1 September 1996, either individually or coUectively, which may have had a bearing on the working relationship between the CounciUors and the CEO."

This matter is fundamental to the governance of Dare bin. A satisfactory working relationship between Council and its CEO is essential. Consideration ofTenns ofReference No. 3 is in two parts.

First, to understand the relationship I found it necessary to give detailed consideration to various factors influencing the CEO and Councillors. Particularly, the influences on the voting patterns of Council are complex and hidden. It is necessary to understand the political environment in which Darebin Councillors operate so that the working relationship between Councillors and the CEO can be considered.

Second, I describe aspects surrounding the events of September 1996 and the actions of individual Councillors.

Structure of Council

Factional Split and Caucussing

While Councils are not elected along mainstream political party lines individual Councillors obviously have personal ideologies and beliefs. The Darebin City Council lies within an area which is stronghold Australian Labor Party at both the Federal and State Levels. It is therefore to be expected that Councillors have beliefs more aligned with those of the Australian Labor Party than with other political parties.

For a long time prior to the Dare bin City Council elections, Australian Labor Party supporters had been thoughtfully preparing for the election. They were pleased, and I was told a little surprised, when they gained all nine places on Council. So much is straightforward.

It is perhaps more difficult to understand that Labor Party faction affiliations should strongly find their way into local government at Dare bin. Of the nine elected Councillors I was told that:

• four belong to the Socialist Left faction; • four belong to the Labor Unity faction; and • one belongs to the Pledge faction.

47


In the following paragraphs I give unconfirmed details about factions. Councillors were reluctant to provide information. Such secrecy feeds the thought that there is something untoward in the factional influence within Darebin City CounciL I was told but unable to confirm:

• that factions caucus prior to Council meetings and subsequently (at times) vote on factional lines;

• that the whole Council caucus prior to formal Council meetings with Councillor Anderson as leader and Councillor Politis as Secretary;

• that the Chairman of the Left faction is Councillor Politis and Councillor Bilias is Secretary;

• that when the Labor Unity Faction caucus, only the four Labor Unity Councillors are present; and

• that on the other hand when the Left Faction caucus, nonCouncillors also attend and provide input to the caucus meetings.

As described later under the heading "Outside Influences on Councillors" non-Councillors were present at an important formal meeting of the Labor Unity and the Labor Renewal Alliance Factions when a deal was struck regarding the Darebin Mayoral appointment.

Throughout most of 1996, if voting occurred on factional lines, it was as follows:

Majority Block Minority Block

Four Socialist Left + one Pledge Four Labor Unity

On several occasions I was told that the Labor Party factional re-alignment at the State Level which occurred late in 1996 has direct impact at Darebin. The Pledge faction and the Centre Unity faction are now aligned and the Socialist Left has split. As described below this was of decisive importance in appointment of the Mayor at Darebin for 1997/98.

The two blocks at Darebin are now as follows:

Majority Block Minority Block

Four Labor Unity + One Pledge + Three Socialist Left One Labor Renewal Alliance

48

Inquiry into Darehin City Cour~cil

This shows that voting strength at Darebin has moved to the Centre oriented faction. There was a general belief that this formation promises a more stable environment for the immediate future. However there was substantial doubt about whether it would continue for long. Such doubts relate to substantial forces acting on the Australian Labor Party as a whole.

All Councillors at Darebin are aligned with a particular Australian Labor Party faction. This alignment is strengthened by the fact that Councillors Steven Tsitas, Nazih El Asmar and Alison Donohue are employed in the office of politicians. Consequently any changes at State and Federal level may be reflected in the voting blocks at Darebin.

The voting blocks within the Council may change quickly and unexpectedly. Such potential instability does not operate in the best interests of the good governance of the Darebin City Council.

On 24 February 1997 public hearings under oath were held. To better inform myself about political influences at Darebin several general questions regarding Australian Labor Party factions were put to Councillor Politis.

He resisted answering and Mr Hayes, solicitor acting for Cr Politis, put it to me that such questions did not lie within my Terms of Reference and were not pertinent.

In his testimony Cr Politis said that Councillors were nine individuals and acted as such. He said " ... there is a perception ... that the factions are preventing the Darebin City Council from functioning, that is certainly not the case, I have an excellent relationship with most if not all Councillors." I did not pursue the matter.

Subsequently in the Preston Post Times of 5 March 1997 Councillor Politis was quoted as saying "The questions about factions were i"elevant. It was a mud-slinging exercise."

It is regrettable that Councillor Politis chose to not give me his views on this matter; many others chose to. As can be seen by this report I believe that politics including factional groupings of the Australian Labor Party are influencing governance at Darebin.

49


Indeed immediately after Councillor Politis stood down I was handed a signed addressed letter which said:

"MrEisum

Re: Inquiry into Darebin Council

As a Northcote resident/ratepayer, I am angry at Darebin Councillors prioritising State and Federal Labor Party politics over community well-being. Get rid of the opportunity to Branch Stack & rewards for the useless. We want representatives who have our needs foremost & not the Labor Party".

I do not place particular emphasis on one letter except to say that with one exception every statement in this heartfelt plea succinctly reflects views that I :frequently heard at Darebin. The exception is that no-one else suggested to me that rewards are going to the useless.

I was often told about the influence of the Australian Labor Party and its factions but had difficulty in having any detailed discussion with the Darebin Councillors. Therefore I decided that Councillor Politis should again be approached. I instructed an officer of the Office of Local Government to contact Cr Politis to convey the following message to him on my behalf:

"On Monday 24 February you were asked some questions about political factions within the Darebin Council. You were reluctant to provide any information. Also your legal adviser put it to me that the questions were not relevant and were outside my Terms of Reference.

My difficulty is that there is a widespread perception that factions impact the way Council operates including agreements on election of Mayor, factional caucussing, attitude on staffing matters etc. This has been put to me both by people closely associated with Darebin Council and by others with a less direct association. I intend addressing the matter in my report. The purpose of the questions put to you was not to embarrass you but to inform me. I therefore regret that you were unable to help me. Your statement that Darebin Councillors present themselves as nine separate individuals is not commonly accepted

50


Therefore I would welcome the opportunity to meet again with you so that I may fairly understand your point of view. My preference would be a private meeting with open discussion. If you are unable to agree to this could you suggest the type of meeting, if any, with which you would be able to co-operate, please".

Subsequently Councillor Politis agreed to meet privately with me. Prior to the meeting Mr Hayes contacted my office on behalf of Councillor Politis. Mr Hayes sought an assurance that I would not discuss any matter with Councillor Politis which was not covered in the above statement. I met with Councillor Politis on 7 March 1997. The conversation was respectful. It re-traced the matters covered in the public meeting.

Councillor Politis agreed that all Councillors belonged to particular factions. He reiterated that his factional membership was private and irrelevant to my Terms of Reference. He neither denied or confirmed that he is a member of the Socialist Left faction. He agreed that he had meetings "occasionally" with people of his own faction. However, he said that was not noteworthy as he often spoke with Councillors belonging to other factions. He said I had been misinformed when I had been told (as reported above) that the Chairman of the Left faction is Councillor Politis and Councillor Bilias is Secretary. He denied that he plays any leadership role in his faction.

Councillor Politis said that all nine Councillors meet (usually on a Sunday at the Town Hall) to discuss matters prior to Council meetings on Monday. He denied that this was a Caucus where Councillors commit themselves to vote in a particular way. When I pressed this he rather evaded the question by saying that there were so many matters it was quite impossible for all questions to be agreed. I did not put it to him, that perhaps less important matters could be left but important political type matters may have a Caucus commitment.

In her evidence under oath on 24 February 1997 Councillor Bilias says "The entire Council caucuses" while Councillor Keirl says "We regularly have had caucus meetings but nothing of a fiXed nature".

Councillor Laurence, under oath, was less direct. When asked by Mr Mcinnis, Counsel on behalf of the Commissioner, whether he attended informal meetings the following exchange took place:

51


"Councillor Laurence "I discuss issues with other Councillors at informal meetings and information sessions when I attend. "

Mr Mclnnis " ..... we heard from other witnesses that there is an informal Council meeting before the formal Council meeting .. .! take it you attend both the formal and informal meetings. Is that right?"

Councillor Laurence "Sometimes, it depends on availability. I also don't know that any of these meetings are regular on any basis. It depends on the issues. "

Earlier in his evidence, Councillor Laurence had made the curious statement that he ''was excluded on 2 September" when a Councillor information meeting was held. It has not been suggested to me at any other time by Councillor Laurence or others that he was excluded and I believe he could have attended if he had been able to make himself available.

Councillor Politis stated that he had only the most occasional social contact with State Members of Parliament. He said he believes that the question of outside influence has been overstated. "The perception is perhaps fed by Councillors working in the offices of Members of Parliament", he said.

With Councillor Politis' agreement and co-operation I asked some further questions. He said that he was aware at the 2 September 1996 meeting that the redundancy program would be immediately implemented. He was concerned but resigned himself to this unpleasant action. I asked if there had been threats to Mr Spiller during the time of Industrial Disputation. Councillor Politis said it was a difficult time and Councillors were talking about many possibilities. Obtaining a new CEO may have been mentioned but certainly there was no definite or concerted action in that regard; nor is there now.

The factional membership of the Councillors at Darebin is shown in the following table. This information was not given to me by Darebin Councillors. It is as reported in the Preston Post Times on 16 October 1996.

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Name of Councillor Ward Faction

Cr Royce Keirl Snr (Mayor) Cazaly Laborunity

Cr John Anderson Clifton Socialist left

Cr Nazih El Asmar Rucker Socialist left

Cr Matty Bilias James Socialist left

Cr Alison Donohue Spring Laborunity

Cr Chris Kelly Oakhill Laborunity

Cr Tim Laurence Merrilands Pledge

Cr Spiro Politis Barunah Socialist left

Cr Steven Tsitas LaTrobe Laborunity

Caucussing and Informal Meetings

Australian Labor Party factions are an entrenched aspect of Darebin City Council. Speaking to people in private left me in no doubt that factions meet before Council meetings and agree their vote. This practice is not illegal but is not desirable in that it reduces the effectiveness and dignity of Council. Councillors who were questioned under oath played down the importance of factions. Given that the Council is factionalised it would be preferable if all Councillors were open about their association.

I find all Darebin Councillors meet prior to Council meetings and agree how to vote on important matters. This is called a caucus.

It has long been my business experience that informal briefing sessions for a Company Board by management is a useful procedure. It enables ideas to be tried out, changed and thought about. Such meetings provide an environment where individuals get to know each other. However it has not been my experience in organisations large and small in both private and public sector that the Board meets regularly without the CEO present.

Indeed it is only where the CEO's remuneration is discussed or in crisis; perhaps questioning the CEO' s competence that the CEO is absent. Management is also sometimes absent during meetings if a company

53


takeover is occurring. In general however it is most unusual for a CEO not to be present at Board meetings, formal and informal.

Also I have not experienced caucus sing of the type where the Board meets informally and then commits itself to a formal course of action which is rubber-stamped at a Board meeting. Of course ''understandings" occur but not rigidly in my experience.

While there is some slight doubt that factions at Darebin caucus on a regular basis it is certain that the Darebin City Council as a whole meets, usually on Sundays, without management and commits itself to courses of action on important matters.

There are three aspects about this which are generally unacceptable:

First, with management absent it is difficult for the Council to be properly informed. It permits politically dominant individuals to proceed unchecked in an environment that lacks the "checks and balances" which exist at other levels of government. This happens at Darebin.

Second, regularly deciding courses of action with little chance of revision in the formal Council meeting becomes a "secret, behind closed door" affair. It is frequently seen as being underhand. The proper function of Council meeting is reduced, the dignity of Council is damaged, sinister interpretation then contempt for Council, Councillors and Council staff then arises.

Third, an environment of suspicion and distrust leading to contempt can easily develop between Council and management. It is difficult for a CEO to firmly commit to courses of action which have been decided without advice and input from the CEO.

As a generality I suggest that:

• councillors should not have regular meetings in the absence of ~anagement;and

• pre-deciding matters and committing Councillors in advance of meetings is not a sound practice.

Despite the above, informal briefing and discussion meetings should be encouraged.

Finally, I remark that I found it curious at Darebin that Councillors who claimed the meeting on 2 September 1996 did not bind them because it was not a formal meeting are those reputed to support caucussing before

54


meetings! There is an unpleasant contradiction here.

Geographical Split

The structure of Darebin City Council is also affected by differences between the previous City of Northcote and the City of Preston. The merger of Preston and Northcote has not been an easy one. While both are strong Labor Party areas there are substantial ideological differences between the two areas.

While Preston has been more of a blue collar traditional ALP area, Northcote has been less traditional. Historically Preston has been more interested in physical improvements in infrastructure while N orthcote efforts have been directed more at social programs, I was told. The City of Northcote had a record of higher expenditures than the City of Preston. These historic differences in direction has complicated the merger of the two cities.

At Darebin the four Councillors representing Wards located in Northcote are Socialist Left namely

Name of Councillor Ward Faction

Cr John Anderson Clifton Socialist left

Cr Nazih El Asmar Rucker Socialist left now Labor Renewal Alliance

Cr Matty Bilias James eft

Cr Spiro Politis Barunah Socialist left

The factional re-alignment described above reduces the influence of Northcote based Councillors all of whom are in Left factions.

55


Outside Influences on Councillors

During the course of the Inquiry I was told that Darebin Councillors are influenced by political entities outside Darebin Council. These included:

• three Councillors are employed by local ALP Parliamentarians and are influenced by them;

• factions at Darebin receive their orders directly from State and Federal factions;

• state politicians attend caucus meetings of factions of the Dare bin City Council; and

• factional agreements on rotating the Mayoral position at Darebin.

When I raised these matters with Councillors they were evasive and noncommittaL The intention of their words was to play down any outside influence. They persisted even when I remarked that I was under a strong impression that such influence existed. Councillors employed by State Parliamentarians agreed that they discussed Darebin affairs with their employer but stressed that these were straightforward general conversations. All Councillors deliberately attempted to influence me to believe that State Parliamentarians did not influence them in their conduct as Councillors of the Darebin City Council.

On Thursday 10 April 1997 the Honourable Robert Maclellan MLA, Minister for Planning and Local Government spoke in the Legislative Assembly about a document which reflected an agreement made on 21 March 1997 between Batman Labor Unity and Batman Labor Renewal Alliance factions. That document was signed:

"On behalf of Labor Unity

Mr Michael Leighton, MLA; Darebin Councillor Royce Keirl Senior; Darebin Councillor Chris Kelly; Dare bin Councillor Alison Donohue (employed in office ofMr Leighton); Darebin Councillor Steven Tsitas (employed in office ofMr Leighton).

On behalf of Labor Renewal Alliance

The Hon Theo Theophanous MLC; Ms Danielle Green; Dare bin Councillor Nazih El Asmar (employed m office of Mr Theophanous ). "

A typed version of the agreement is given at Attachment 5.

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The agreement dealt with various factional matters and also with "maintaining a Labor Council in Darebin". It continued with agreements that Labor Renewal Alliance faction would occupy the Darebin Mayoralty in 1997-98 and the Labor Unity faction would occupy the Darebin Mayoralty in 1998-99.

This agreement demonstrates that:

• factions caucus and make formal agreements; • factional political support is an element in Council elections; • non-councillors are intimately involved with appointment of the

Mayor of the Darebin City Council; • the agreement excludes Councillors who are not members of

either the Labor Unity faction or the Labor Renewal Alliance from the Darebin Mayoralty during the next two years; and

• the qualities required of a Mayor were not part of the agreement; factional membership is the important factor.

I would be naive to believe that such unhealthy influences do not extend to many important matters at Dare bin.

It is unlikely that this agreement is the only one of its kind. It demonstrates the truth of assertions often made to me. Those assertions were that behind the scenes political and factional deals are an everyday part of life at Dare bin City Council. I am led to the inevitable conclusion that Darebin Councillors attempted to hide the truth from me when I discussed caucussing and the affect of outside influences on them. Even under oath Councillor Keirl was less than forthcoming about matters discussed at Caucus meetings.

I am not the only one to be given false information. The Melbourne Times of 9 April 1997 reports Councillor Alison Donohue, a signatory to the document, as denying the existence of a deal. The newspaper article included the following comment "Cr Donohue said there were no arrangements for the Mayoralty beyond the current term of office." Councillor Donohue's reported statement is untrue.

Just after the above matter was mentioned in the Parliament I was a little surprised to receive a letter dated Friday 11 April from Mr Michael Leighton, MP. Enclosed with the letter was a copy of the Constitution and Parliamentary Committees (Amendment) Bill currently before Parliament and an extract from the Minister's Second Reading Speech.

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Mr Leighton suggested that it may be prudent for me to obtain legal advice about my powers (to call witnesses) as a Commissioner which are derived from Section 214 of the Local Government Act 1989. No person, at any time, either at the formal hearing or otherwise expressed any concern regarding my powers to question and obtain information within my Terms of Reference. Indeed, all expressed a desire to be co-operative which in the main occurred. I have referred the matter to the Office of Local Government for advice so that any uncertainty is addressed.

I find that decisions made by Darebin Councillors about the appointment of Mayor and probably other matters are influenced by State Members of Parliament. This inevitably affects the relationship between Council and management including the CEO. "Who really runs the place?" was a question I have been often asked about Darebin. No short answer is possible.

Election of Mayor

When I first went to Darebin in December 1996 I was informed that there was an understanding that Councillor Keirl Snr would be the first Mayor followed by Councillor John Anderson then Councillor Chris Kelly. It was expected that Councillor Anderson would be elected Mayor in April 1997, I was told. However I was also told that that this arrangement may become unstuck because of the re-alignment of factions at the state level. Such proved to be the case.

On 26 March 1997 the Preston Post Times had a front page article headed "Darebin: 'It's war"" which states "Labor Unity, which now has the greater numbers on Council, has reneged on the deal with the Socialist Left and intends to dictate who will be the city's next Mayor".

On Wednesday 9 April1997 the newspaper reported that Councillor Na.zih El Asmar is set to become Mayor. This agreed with the "Outside Influences" document tabled in the Victorian Legislative Assembly which is mentioned above. Councillor Politis (Socialist Left faction) is reported as saying this "doesn't set a very strong platform for co-operation in the future. " Ba1man Socialist Left Convenor Mr Ray Tunks is reported "The Socialist Left is not going to take this lying down ".

The factional deal described above has led to bizarre side effects. The Preston Post Times of 23 April reports Councillor Laurence as saying that the three Socialist Left Councillors (Anderson, Bilias and Politis) had gone on strike and should not draw their Councillor allowance. In the antagonistic environment at Darebin it appears that the Socialist Left Councillors (all excluded from the factional deal) are also being excluded

58


from Committees or alternatively are choosing not to participate.

The office of Mayor is not merely ceremonial in nature. The rewards for occupying the position of Mayor are obviously substantial and recognise the leadership skills, responsibility and duty of care expected of the occupant of that important position.

When a Mayor is appointed it would make a substantial contribution to municipal governance if the appointment depended on leadership skills and not political dealmaking or taking the position in turns.

Deals, secret or otherwise and any subsequent breakdown creates and contributes to long lasting hostilities and distortions which work strongly against good governance. The working relationship between management, the CEO and Council is adversely affected when selection of Mayor depends on factors external to the welfare of the City.

The appointment of Mayor at Darebin and membership of Council Committees is now highly politicised. Councillor Nazih El Asmar became Mayor because of a formal ALP factional deal which breached an earlier deal. State Parliamentarians Michael Leighton and Theo Theophanous are signatories to the deal. Whether or not Councillor Nazih El Asmar has the qualities to be Mayor seemed not to be a factor in his appointment; it is a pure political deal.

Politics

Politics are accentuated by the fact that Councillor Nazih El Asmar's most recent employment was as Electorate Officer in the office of the Hon Theo Theophanous.

The factional deal means that the intimate relationship between Darebin Council and ALP State parliamentarians will continue, possibly for a long time. The deal aimed at "maintaining a Labor council in Darebin ". It included agreements that the Labor Renewal Alliance faction (Councillor Nazih El Asmar) would occupy the Darebin mayoralty in 1997-98 and the Labor Unity faction would occupy the Darebin mayoralty in 1998-99.

The Labor Unity faction has the following Darebin Councillors as members:

Darebin Councillor Royce Keirl Senior Darebin Councillor Chris Kelly Darebin Councillor Alison Donohue (employed in office of Mr Leighton)

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Dare bin Councillor Steven Tsitas (employed in office of Mr Leighton)

Consequently if either of Councillor Donohue or Councillor Tsitas become Mayor the intimate relationship with local Members of Parliament will continue. Councillor Donohue told me she is optimistic that she will gain ALP endorsement and then be elected to State Parliament at the next election. Being Mayor of Darebin provides substantial resources and a high local profile which assists such political aspirations.

Mayoral Allowance 1996-1997

After the Council election in April 1996 the Councillors elected Councillor Royce Keirl Senior as Mayor. This position is eagerly sought as the premier elected position with attractive direct and indirect rewards. The remuneration paid to the Mayor is substantial and important to the recipient. It is not considered as merely a minor contribution to livelihood; it would not be uncommon for it to substantially exceed the recipient's usual remuneration.

The following emoluments were paid:

MAYOR COUNCILLOR Mayoral Allowance $45,000 Councillor $12,000 $12,000 Allowance Expense Allowance $4,000 $1,500 Motor Vehicle Fully maintained and NO

serviced Ford Fairlane with full personal use including interstate travel

Mobile telephone YES YES Laptop computer YES YES Home F AX/phone YES YES with dedicated line Paaer If required If required

The amount paid to Councillor Keirl Sm, as Mayor was not clearly described to the community. At the commencement of the Inquiry I was given the impression that the Mayor received a total $25,000 per annum. I assumed that amount would be subject to the same taxation laws as all citizens. On deeper questioning I found that the $25,000 was the after tax amount. The correct amount is $45,000 as shown above.

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Later on I realised that the Mayoral allowance is paid on top of the Councillor Allowance. It seems I am not the only one who is unclear. In the Preston Post Times on 26 February 1997 there is an article about provision of Credit Cards to Councillors. That article includes the statement that all Councillors "agreed Cr Keirl as Mayor should receive a $4000 allowance on top of his $25,000 a year salary. " The Melbourne Times on 9 Aprill997 reported that the Mayoral allowance is $35,000.

Obviously Councillor Keirl as Mayor received substantially more than reported by the newspapers.

During March 1997 I made further inquiries and found that the Council had passed resolutions regarding Councillor and Mayoral Allowances on 21 March 1996 with a revision on 25 November 1996.

On 21 March 1996 the following resolutions were passed:

"The Councillors' allowance for the period 211311996 until 151311997 be set at $12,000. The Councillors' allowance be paid quarterly in advance. The Mayoral Allowance will be fixed at $25,000 higher than the Councillors' allowance for the ensuing year.

The Council also meet the cost of-

a) providing and/or hiring transport required by the Mayor and partner in the performance of duties;

b) providing refreshments for all meetings and any civic functions; c) tax suffered by the Mayor on the additional $25,000, as certified

in writing by an authorised Tax Agent;

The allowance be paid quarterly in advance, i.e. $13,000 in the first quarter and $8, 000 in the remaining three quarters".

I was told that these unequal amounts for quarterly payments applied because the Mayor was obliged to give the first $5,000 of the Mayoral allowance to a political party and that consideration had been taken into account by the Council. I was not able to confirm this assertion which is hearsay. If it is correct, and a widespread practice, it is a most unfortunate inclusion of party politics and funding into local government. Such practices should be discouraged.

Councillor Nazih El Asmar, the recently elected Mayor, denies that he is under any obligation to pay part of the Mayoral allowance to a political party. This may now be so. I suspect that this assurance comes from

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changed arrangements flowing :from the suspicions becoming public during this Inquiry.

I was told several times that Mayors of Labor Councils are under an obligation to pay $5,000 to the ALP. In the time available I could not pursue the assertion. One indication relates to the tranches of payments made to Councillor Keirl where the first quarter allowance exceeded the subsequent three quarters by $5,000. This $5,000, I was told, was donated to the ALP.

On 25 November 1996 the following resolutions were passed:

"The earlier resolution no longer be implemented and more particularly:

Any costs incu"ed by the Mayor's partner in the provision or hiring of transport no longer may be met by Council; and any taxation payable by the Mayor by reason of the payment of the Mayoral Allowance or reimbursement of expenses incu"ed in the connection of his duties not be paid by Council.

The Mayoral Allowance now be fu:ed in the annual sum of $45,000. Council reimburse the Mayor for any necessary out of pocket expenses incurred by him while peiforming his duties as a Councillor.

111AT the Recommendation be received and adopted and that the report is to remain confidential".

I am advised that this resolution followed advice :from the Office of Local Government that the earlier resolution was illegal. The 25 November 1996 resolution does not highlight that at Darebin the Mayoral Allowance of $45,000 is paid in addition to the Councillor allowance of$12,000. This is substantial remuneration.

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Mayoral Allowance 1997-1998

Councillor Nazih El Asmar the recently appointed Mayor of Darebin now receives the following remuneration:

MAYOR I Mayoral Allowance $76,000 Councillor Allowance $12,000 Expense Allowance Motor Vehicle Fully maintained and serviced Ford

Fairlane with full personal use including interstate travel

Mobile telephone YES Laptop computer YES Home FAX/phone with YES dedicated line Pa2er if required

This is an extraordinary increase of $31,000 pa in the already high remuneration which was paid to the outgoing Mayor.

Usually, remuneration depends on both the occupant and the position.

Until 1993 Councillor Nazih El Asmar worked with the tramways as a conductor, driver, inspector and project officer. His most recent full-time employment was as Electorate Officer in the office of the Hon Theo Theophanous, MLC. I suggest his remuneration would have been modest. Councillor Nazih El Asmar presented to me as a pleasant forthright man. However, I can think of no legitimate basis which would lead me to expect that he should suddenly receive a total package exceeding $100,000. I expect it is substantially greater than any level of remuneration received previously.

Independent of the occupant what should the Mayoral allowance be?

Later in this report I mention Councillor remuneration. I say:

"I suggest remuneration should be set at a level to cover the myriad of expenses incurred by Councillors in going about their task. Being a Councillor should not be seen as akin to employment and councillors should not be remunerated on that basis. "

The remuneration currently paid to the Mayor ofDarebin clearly breaches this sentiment.

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It is also reported that remuneration can be taken a year in advance. This is bad practice. A Mayor may die, or resign or be overturned and be unwilling or unable to repay any amount paid in advance.

Generosity of the type described here by elected officials to their own, inevitably causes widespread concern. It is just too cosy an arrangement. Councillor Nazih El Asmar is the fortunate recipient this year and others who voted on the Mayoral allowance stand in line to reap the benefit in subsequent years. Obviously Darebin employees will make their own conclusions about the appropriateness of this level of remuneration. Inevitably relationships between management and Councillors are adversely affected if Councillors reward themselves with excessive remuneration.

It is my view that the responsibility and skills required of the Mayor of Darebin deserve remuneration at less than half that being paid to Councillor Nazih El Asmar.

JUSTIFICATION; a Charitable donation

In a letter to the Premier, Councillor Nazih El Asmar seeks to justify his remuneration in a curious way by saying 10% ($7 ,600) will be given as a charitable donation. This is a personal decision on expenditure and should not be related to setting the Mayoral fee. If such a principle is accepted then any level of Mayoral or Councillor allowance could be justified on the grounds that it will be passed on to a favoured (and no doubt publicly popular) charity.

As a minor quibble I point out that the Mayor's remuneration package is substantially higher than the $76,000 Mayoral allowance so some amount less than 1 0% is in fact being donated.

I expect any donation will be tax deductible which effectively halves the cost to Councillor Nazih El Asmar.

JUSTIFICATION; a full-time job

Councillor Nazih El Asmar says he will work full time as Mayor and has given up his employment as an Electorate officer with a Member of State Parliament. There are three difficulties with this as an argwnent for such excessive remuneration:

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1. the position of Mayor is part time, not full time. It is Councillor Nazih El Asmar's personal choice to work full-time. In passing I comment that full-time involvement inevitably results in overlap


and conflict with the work of the CEO; 2. Councillor Nazih El Asmar' s relinquished employment as an

electorate officer is too close, geographically and in function, to believe that it ceases. It is not unfair to suggest a strong perception that Councillor Nazih El Asmar's Electorate Officer political skills and knowledge will continue to be available to the Hon Theo Theophanous. However, the cost of employing him will be born by the ratepayers of Darebin and not by the Hon Theo Theophanous's office;

3. Working full-time in a position does not automatically convert it to a $100,000+ job; fair remuneration would be less than half that being paid.

Relevance of Mayoral Remuneration to this Inquiry

This Inquiry resulted from redundancies which occurred at Darebin in September 1996. Those redundancies aimed at reducing recurrent expenditure in the City. As reported under the later heading "Financial Situation of City" under Terms of Reference No. 5 Darebin faces a shortfall of income compared to expenditure in excess of $5 million in each of the next two years. The redundancies aimed at reducing this shortfall.

In such circumstances it is the responsibility of management, Councillors and particularly the Mayor to provide responsible fiscal leadership. Such responsibility includes restraint in the personal rewards obtained from the city. In these circumstances it would be expected that all concerned with municipal governance would restrain their personal remuneration. It is very difficult for employees to restrain spending if there is a perception that Councillors and the Mayor are over-rewarded.

This Inquiry is about the relationship between elected Councillors and management and governance of the City of Darebin. Any perception that Councillors and the Mayor are over-rewarding themselves adversely affects the relationship with the CEO. It contributes to poor governance of the City.

Adverse comment about the remuneration was volunteered to me by a man in working clothes in the Council carpark. In the short conversation before I abruptly terminated the approach I detected an attitude of despairing resignation.

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September 1996

The above gives general background infonnation relevant to the working relationship between the CEO and Council. As the second part of the discussion relating to Terms of Reference No. 3, I now turn my mind to the events surrounding the September 1996 redundancy program. Under Terms of Reference No. 2 I have described at length the actions flowing from a Special Meeting of Council on 16 September 1996 where it purported to withdraw the delegations of the CEO in relation to staffing and industrial matters.

The Mayor and one or two Councillors commenced direct negotiations with striking branches of the Australian Services Union. This action severely disrupted the working relationship between Council and the CEO until it was corrected shortly afterwards. I will not repeat the detail here. Some further comments on the actions of the Mayor and specific Councillors is required and now given.

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Council

DATE INFORMATION

6 September Councillors Anderson, Bilias and Politis (all present at the briefing session) distanced themselves from the 2 September 1996 meeting. The CEO believed he had previously obtained their support.

12 September The Mayor informed the CEO that the Councillors were questioning the CEO's judgement. The Mayor informed Mr Spiller that Councillor Anderson had said "more pressure needs to be put on Kelvin to withhold his contract."

17 September In private, the Mayor reprimanded the CEO regarding the attendance of John Hartigan, Acting Director of the Office of Local Government at the Special Meeting of Council held on 16 September. Mr Hartigan attended at the request of the Minister. Councillors took umbrage that the CEO did not introduce Mr Hartigan to them prior to the commencement of the Special Meeting of Council. The meeting was a public meeting.

Approximately 10 minutes before the same meeting, the CEO was told by a subordinate, the Director Finance & Executive Services that he had heard that "two more heads of senior staff would roll".

18 September The Mayor and a Councillor took over negotiations directly with the Union in relation to a number of industrial relations matters.

21 September Radio interview by Councillor Tim Laurence with Bill Hartley from Community Radio 3CR, which questioned the management competency at Darebin

23 September A Councillor had direct conversations with staff in relation to some other resignations and tried to persuade them to retract their resignations.

29 September The Mayor and Councillors had an informal meeting with the Secretary of the VLGA. Cr Mike Hill (Mayor of the Moreland City Council). Cr Hill was asked. on behalf of the Mayor and the Councillors, to contact the CEO in relation to the Minister's suggestion about a Mediator. The CEO was not informed about this meeting and first knew about it when Cr Hill telephoned the CEO.

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Council

1 October~ Letter from CEO to the Mayor

"I wish to advise that on Sunday, I received a message on my pager to ring Cr Mike Hill, who wanted to meet with me this week to put a proposal to me in relation to the current suggestion by the Minister for Local Government to appoint a Mediator.

I indicated to Mike that there was no point in having a meeting as my understanding was the Minister had a program in mind in relation to this matter and that an officer from the Office of Local Government had been suggested to me and I had, in fact, indicated that I had no objection to him being appointed as Mediator.

I also indicated to Mike that you had not discussed this matter with me and that it was not appropriate for me to be discussing such matters with him or anybody else until you had done so. He indicated that he had met with yourself and the Councillors at 9.30 am on Sunday morning and that you had all agreed he should contact me.

Although you have now explained the reasons why to me this morning, I am still placed in a difficult situation, when you have not discussed a matter with me and a third party wants to be involved. There are very clear lines of communication and protocol that we normally adopt and I have made every attempt to ensure that I do this. However, I still consider I should have been advised by you of any informal decisions that may have been made prior to you requesting a third party to contact me.

I have also had a phone called from the Melbourne Times this morning that information has been received in relation to the meeting between yourself, Councillors and Cr Mike Hill on Sunday morning and I was asked was it correct that I had rejected the Council's attempt to solve this matter in-house. I have advised the reporter that the Minister has a program in place and that neither you or any other Councillor has discussed with me any other proposal. I have also advised that it is not appropriate for me to be speaking to a third party in the absence of any discussion with yourself

I was also asked whether I was happy with the proposal put forward by the Minister for Local Government in relation to the appointment of a Mediator. I indicated that I thought the proposal put forward by the Minister was a positive step for the municipality and that I had no objections to the person put forward who is well respected and an acknowledged person in local government with wide experience. I further indicated that I understand that the matter will be determined by the Minister.

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As indicated to you this morning, the above is another clear example of why an independent Mediator is necessary. It is not acceptable for individual Councillors to go to the local press, clearly in an attempt to "set me up" with information that is not factual. "

Clearly, the action of Councillors in seeking outside assistance without the prior agreement and co-operation of the CEO was ill advised.

Actions of Councillor Anderson

As described under Terms ofReference No. 4 a threat was made regarding Mr Spiller' s employment by Councillor Anderson. The CEO felt that his employment was threatened when he was informed that Councillor Anderson had suggested that "more pressure needs to be put on Kelvin to withhold his contract".

Councillor Anderson, has a long histocy in local government. From comments made and my observation I have concluded he has considerable influence, particularly over the inexperienced. He presents as a forceful personality. Study of Council minutes suggests he is skilled in shrewdly exploiting small procedural niceties of Council decision making. This is probably combined with behind the scenes manoeuvrings. This makes the work of the CEO difficult.

Actions of Councillor Donohue

Councillor Donohue informed me that she was approached by the Union to help settle the strike. She believed herself to be experienced in the area. There was a crisis; she said she did what she could and withdrew as quickly as possible. By doing this she interfered in the work of the CEO and the management team. This should be seen as an error of judgement on her behalf, in the heat of the crisis, and not ill-intentioned. Councillor Donohue's skills and contacts could have been tapped by the CEO if he needed them. My criticism is of the Council as a whole for authorising the Mayor and Councillor Donohue to take over managerial responsibility.

As indicated elsewhere, there was uncertainty and ambiguity on what exactly had been negotiated between the union officials and the Mayor and Councillor Donohue.

There is one other aspect that could be mentioned here. There is confusion in recollection as to whether the Mayor was accompanied by one or two Councillors. Certainly Councillor Donohue participated. It is probable another Councillor attended. This is not an important point except to indicate the confusion of the time. Throughout this report I refer only to the Mayor and Councillor Donohue entering into negotiations.

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Actions of Councillor Laurence

As described previously Councillor Laurence' s letter writing campaign commenced on 17 October 1996 with 20 letters being received by 3 December 1996. It was suggested to me that there was an orchestrated campaign to deluge the CEO with detailed management matters. At a later date some of these details would be listed as a means of criticism and a reason to replace the CEO.

Actions of the Mayor, Councillor Keirl Snr.

Throughout the difficulties in September 1996 the Mayor did not provide appropriate leadership. The deficiencies were:

• he was unable to hold the Council together on a previously agreed course of action;

• he was party to the Council withdrawing the delegations of the CEO;

• he undertook a management role by entering into negotiations with the Australian Services Union. (In passing, I comment that when being questioned under oath Councillor Keirl denied that he had negotiated saying he had merely held discussions. Such hair splitting is not helpful);

• he went along with other Councillors in agreeing that Councillor Donohue negotiate with the Australian Services Union;

• he conveyed a threat from Councillor Anderson to the CEO; • he agreed with the Minister that a Mediator should be appointed

and subsequently was unable to obtain Council agreement to this commonsensesuggestion;and

• he was a party to a discussion with officers of the VLGA regarding the strike without informing the CEO that this was to occur.

I have considered whether these comments are harsh and unfair to Councillor Keirl. After review I have decided they are fair. Councillor Keirl accepted the office of Mayor with its substantial rewards and responsibilities. He accepted the rewards but was unable to fulfil the responsibilities.

The Mayor and Council failed to pull together and properly support the CEO. With garbage being uncollected, health hazards were developing and both Council and the CEO had a prime responsibility to ensure that the operation of the City returned to noilllal.

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The CEO reported to Councillors that other options of collecting the street litter bins, if it became absolutely necessary, may have to be considered. He was not suggesting any specific action but ultimately use of external contractors was an option. This comment was seen by several Councillors as being extraordinarily provocative. Strike breaking through such a move was seen as entirely unacceptable for a Labor Council with professed and open ALP affiliations.

Obviously there are matters of considerable sensitivity here. There is no doubt that it is the CEO's responsibility to take necessary action to reduce health hazards and ensure continued efficient administration. It was certainly within his power and indeed his responsibility as CEO to consider other options that might become necessary if a public health hazard existed. The CEO was not at that stage saying that contractors would be used; only that it could be an option if all else failed.

Some would see this suggestion as naive. Darebin Councillors would understandably take action, either in the immediate or longer term, to separate themselves from a CEO unilaterally implementing such action. I emphasise that this was only a suggestion and that the CEO had properly raised the possibility with the Council; he did not propose such action.

Interference Not One-off

Interference with industrial matters by the Council and the Councillors was not an isolated event in reaction to a crisis. It followed a pattern of interference embarked upon by the Darebin City Council from its first meeting. Under the heading Early Actions of Council under Terms of Reference No. 1 I listed actions of Council which contributed to initiating a strained relationship between the CEO and Council. These included:

1. Dare bin resigned from the Municipal Association of Victoria and joined the Victorian Local Governance Association. (Darebin rejoined the MA V on 1 February 1997);

2. at the time of the election the JRC was considering a dispute between the Australian Services Union and Councils. The Council resolved that the Darebin City Council withdraw from the dispute and support the ASU;

3. organisational review.

All of these actions are concerned to a greater or lesser degree with Industrial Relations and governance issues which are the responsibility of the CEO. The withdrawal of delegations was a continuation of behaviour which ignored or undermined the CEO. This adversely affected the relationship with the CEO and resulted in bad governance at the Darebin City Council during that time.

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Inquiry into Darebin City C011ncil

Costs of the Strike

The direct costs to the Darebin City Council associated with the industrial action were in the order of$95,000 made up as follows-

• Closure ofTransfer Station • Non-issue of parking infringement notices • Legal Costs for IR.C appearance

$57,000 $28,000 $10,000

Since the Darebin City Council was elected I consider that it has failed to provide good governance. Speaking broadly governance was questionable from the election until 1 September 1996, bad during the period of industrial disputation, tolerable during the early stages of this Inquiry and now starting to slip again.

Darebin Councillors distancing themselves from management action, withdrawing delegations, taking over the role of management and making publicly critical comments about the CEO during the final quarter of 1996 damaged ongoing stable management and corresponding good governance.

In the above I give considerable detail about factional deals regarding the appointment of Mayor and the excessive Mayoral remuneration cosily approved by Council. A controlling body such as a Council needs to be respected. Such actions lead to contempt from the world at large and from any responsible management. It is inevitable that the working relationship between Council, the CEO and management is being adversely affected. Good governance is suffering as a result.

CONCLUSION - Terms of Reference No. 3: Actions by Councillors

Governance at Darebin and relations between Councillors, CEO and management are adversely affected by factional agreements, the influence of outsiders, the self-seeking remuneration paid to the Mayor, interference in management and the behaviour of Councillors.

The Darebin City Council and some Councillors did not behave appropriately during September 1996.

The period from 2 September 1996 through to early October 1996 was particularly difficult for the CEO, the management team and staff.

Relationships have gradually improved since early October 1996.

The situation is again becoming unstable as this Inquiry nears completion.

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"Whether there have been any threats made by the CounciUors of the Darebin City Council to any person in relation to the employment of the CEO."

Leading up to the Council election early in 1996 there was rumour about replacing the CEO. While this was unsettling for Mr Spiller it probably has to be accepted as a normal part of any official reporting directly to an elected body.

Councillor Anderson

During the Inquiry I reviewed file notes made by Mr Jon Hickman, Deputy Secretary, Department of Infrastructure of a meeting he held with the Mayor ofDarebin Councillor Keirl and Mr Spiller. Those notes indicated that a serious event occurred on 12 September 1996 and were subsequently discussed between Mr Hickman, Councillor Keirl and Mr Spiller.

The alleged event was that on 12 September 1996, through the Mayor, Mr Spiller became aware that Councillor Anderson had said that "more pressure needs to be put on Kelvin to withhold his contract."

On 24 February 1997 Councillor Anderson gave evidence under oath. He was questioned about events which occurred in the last quarter of 1996. He was evasive about having made any comment which suggested the CEO's contract should be reviewed.

Councillor Keirl when under oath, was asked "On 9 September did a Councillor put to you that more pressure needs to be put on Kelvin to withhold his contract?", and he replied "Not that I can recall". Councillor Keirl also denied having made any record of any such conversation. " ... I don't keep records of conversations", he said."

Later in his testimony Councillor Keirl again denied having any record of such a conversation.

After the hearing on 24 February 1997 I again reviewed the diary notes made by Mr Hickman on 8 October 1996 of the meeting with Mr Spiller and Councillor Keirl. They show that with Councillor Keirl present there was discussion about "withholding contract, with more pressure on KS." Separately, I was given :further information which convinced me that the following words or words to the effect that "more pressure needs to be put on Kelvin to withhold his contract" were said by Councillor Anderson at some time prior to 12 September 1996 and relayed to Mr Spiller by

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Councillor Keirl on 12 September 1996.

I have considered the weight I should give to this event. I have remembered that September was a time of stress at Darebin and that heated words and ill-conceived actions occur at such times. I have considered whether harsh words should be discounted or overlooked. I have considered whether the implied threat from such words arises from them being out of context. I have decided a softer viewpoint should not prevail. In reaching this decision I am influenced by the disclaimers under oath made by both Councillor Anderson and Keirl. Both Councillors were less than forthcoming about this serious matter.

Councillor Anderson's words were said at a time of serious industrial disputation. Councillor Keirl passed these words to Mr Spiller. To raise Mr Spiller's contract in that context was improper. It was directed at causing the CEO to move away from the proper performance of his duties.

I find that in the context of the time this was a threat.

Approximately 10 minutes before a Council meeting held on 15 September 1996, the CEO was told by a subordinate that "two more heads of senior staff would roll". This rumour was only three days after Mr Spiller had heard from the Mayor about Councillor Anderson's attitude.

Councillor Laurence

On 21 September 1996 there was a long interview on radio station 3CR with Councillor Tim Laurence. This interview has been mentioned earlier. The interviewer was Mr Bill Hartley who was obviously informed in detail about matters at Darebin. The tenor of the interview was that:

"Kelvin Spill er ... took it on himself and with his own interpretation of the new Local Government Act to dispose of a lot of senior officers ... Heads of Department like the Ethnic Development Officer and the Social Planner"

During the interview Councillor Laurence said:

" .... we've moved to remove the delegation of authority as far as staff matters from the CEO. We have a philosophical difference, I think, between the Council and the CEO ... "

and later:

"It's not fair and the entire process has obviously not been fair. "

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The following extract gives a further indication of the tone of the interview:

MrHartley

"But you (Council) have the power under the Act to remove him (Spiller) and one would think---

Councillor Laurence

"That would be the only course of action"

MrHartley

"----if this was contested in court on the basis of his performance and also causing a general stoppage for 10 days of all the Council staff, I don 't think he 'd survive ... "

It is pertinent to note that this interview was on 21 September 1996 and that the delegations had been reinstated the previous day 20 September 1996.

More than once Mr Hartley alludes to dismissing the CEO with Councillor Laurence not denying the proposition, indeed going along with it. In evidence under oath Cr Laurence asserted that it was not his intention at the time to give an impression that the CEO could be dismissed. The interview concludes with Mr Hartley saying:

" ... Tim Laurence, who is a Councillor of the Darebin Council. And it certainly appears that the foture of the chief executive, Kelvin Spill er, is somewhat obscure.

Maybe before misinterpreting the Act the way he did he should have read the whole of the Act and noted that the Council does have the right to hire andfire him ... "

At the fonnal hearing on 24 February, 1997 Councillor Laurence said he did not hear the compere's opening comments nor these final comments. He attended the interview by telephone.

In the Preston Post-Times of 5 March 1997 there was an article headed "Inquiry 'mud-slinging"'. In that article Councillors Politis, Laurence and Anderson were quoted while Councillors Donohue, Tsitas, Royce Keirl Snr, El Asmar, Kelly and Bilias were reported as refusing to comment. Councillor Laurence was reported as saying that the public session was groundless.

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"There was a confused line of questioning. It is interesting that a small portion of a five-minute interview was picked up. The whole day was completely aimless and a waste of ratepayers ' money.''

This is not a fair comment by Councillor Laurence who seems unaware or uncaring that his words damage the Darebin City Council and its CEO and those working to improve its governance. Councillor Laurence demonstrated inexperience, irresponsibility masquerading as free speech, a naive idealism and an aggressive attitude. These characteristics adversely affect governance at Darebin.

Remarks on radio about Mr Spiller must inevitably have raised questions in listeners' minds about Mr Spiller' s competence and whether there were thoughts of dismissing him. Mr Spiller informed me that in the context of the difficult time he was experiencing he felt threatened by the radio interview. Mr Spiller is a professional appointed officer, he is not in an elected position. In the context of the industrial unrest of the time the interview was intimidating and threatening. Councillor Laurence' s comments and agreement with the general thrust of the interview were irresponsible and constituted a threat to Mr Spiller, and I so find.

On 2 October 1996 these threats had weight added to them when the following letter from a former Northcote Councillor, Mr Stuart Brearley was published in The Melbourne Times.

"Darebin: One Side Must Back Down

As a former Councillor and Mayor of the City of Northcote, and a losing candidate in the last Council elections, I feel I can no longer keep quiet on the situation in the Darebin City Council.

Royce Keirl Jnr's call for the elected Council to be sacked is either extremely naive or political grandstanding in the extreme. He should accept the umpire 's decision and stand for election in 1999.

There is only one solution. Either the Council or the CEO has to stand aside. Patching differences with a State Govemment Mediator will not prevent this situation from re-occurring.

I have the utmost respect for the capabilities of Kelvin Spiller, but he must stand aside and a temporary CEO should be appointed while the job is advertised There are many ex-CEOs around since amalgamation.

Sacking the Council is akin to November 197 4. One individual against an elected govemment. Let there be no mistake, the nine Councillors were elected for a term of three years. They appointed Kelvin Spiller - it

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is he who should go, not a democratically elected government. "

These threats induced uncertainty and insecurity in the CEO. Mr Spiller told me that during one Council meeting his wife sat in his office with the fear that he would be summarily dismissed. She was there to console him and drive him home in the event that the Council owned vehicle was no longer available.

On 6 March 1997 I spoke with two representatives of the PrestonReservoir Progress Association. The Secretary, Mrs Harper listed the organisations she represented and said "we speak for a wide range of people". She said the Association has monthly meetings of " .. ratepayers and residents of different backgrounds, different politics, different philosophy, but we are united by our desire to improve our city."

The representatives were straightforward in approach and broadly put it to me that they are concerned that the democratic rights of Darebin ratepayers might be adversely affected by the outcome of this Inquiry. They gave me a two page submission which includes a paragraph stating "Certainly we believe there needs to be an appraisal of the conduct and peiformance of the duties of the Chief Executive Officer. " This indicates that public comments about Mr Spiller have penetrated deeply, and I believe unfairly, into a concerned community.

To fairly report Mrs Harper I add that her paper included .. constant inteiference by the State Government has an even worse effect on this relationship (between CEO and Councillors), and results in confusion, a break down in morale and a denial of democratic procedures".

I asked what State Government interference had occurred and received vague statements; certainly this Inquiry was viewed as such and concern that the " ... most important positions are imposed on elected representatives as is the case proposed by Government".

CONCLUSION- Terms of Reference No. 4: Threats Councillor Anderson threatened Mr Spiller' s employment. That threat was conveyed to Mr Spiller by the Mayor, Councillor Royce Keirl Senior.

Councillor Laurence participated in a public radio program in such a way that Mr Spiller perceived that his competence was being questioned by Council and that there could be a threat to his employment. Such perception was understandable.

Separately, the actions of Councillors Laurence and Anderson contribute to the ongoing instability at Darebin.

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"The conduct and performance of his duties by the CEO since 1 September 1996. "

Financial Situation of City

At 31 December 1995 there was a second Due Diligence Audit of the Council which reported as follows:

"It is apparent that the City has been soundly financially managed in the period 22 June 1994 to 31 December 1995 as evidenced by the City's financial position and positive budget performance. Significant recurrent savings (in excess of $10 million) have been achieved, the benefits of which have been passed on to the City's residents through rate reductions and enhanced service provision.

An analysis of the City's CCT processes and administrative procedures indicates that the City has been thorough in assuring its preparedness for CCT.

The City is in an exceptionally strongfinancial position.

This positive financial position would indicate that with the expected continuance of responsible and strategic financial management the residents of the City of Darebin can expect their rate savings and enhancements to services and programs to continue for a number of years."

The CEO agreed with this buoyant evaluation and cited the following factors in support-

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• net current assets of $110 million; • the projected budget parameters for the year ended 30 June 1996

would be met; • residents had received rate reductions; • Commissioners had met their commitment in achieving forecasted

savings from the restructure and these savings were passed on to the community;

• no new loans had been raised since June 1994; • Employee costs had declined by more than 21% since the

amalgamation date; • significant volumes of surplus plant and equipment has been sold

since the amalgamation date with proceeds totalling $550,000. A centralised purchasing unit had been established where ongoing


efficiencies would be pursued and achieved; and • Council had reached its CCT target of 20% for the year ended 30

June 1995.

Looking forward, the CEO indicated that the financial picture was less rosy. Significant factors influencing the outlook were:

• rate capping legislation by the State Government introduced a freeze on rates for the 1996/97 year and a 1% decrease less than the rate of inflation for the following years. This required a reduction of approximately $2 million in annual budget expenditure;

• savings from compulsory competitive tendering were less than expected;

• Metropolitan Fire Brigade Levy • Stamp Duty on Motor Registration • levy on Cat & Dog Registrations • Cat Registration Control • abolition of Safer Communities Grant • swimming Pool Legislation & Follow Up;

$75,000 $70,000 $22,000 $50,000 $18,000

• increased demand on Home Care resulting from earlier discharges of patients from hospitals and de-institutionalisation of patients from psychiatric institutions into the community;

• reduction in State Government funding for HACC Service (three positions) which were redirected to the City ofHume and the City ofWhittlesea in the northern region;

• Announcement in relation to sales tax that would apply to vehicles purchased by local government; and

• Funds by State and Federal government for programs serviced by Councils have been reduced.

The newly elected Council was told about the projected shortfalls for the three financial years commencing 1997/98 at a meeting held in June 1996.

The following shortfalls were projected for the year shown:

1997/98 1998/99 1999/2000

$5.5 million $5.7 million $6.4 million

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At the June 1996 budget meeting, approximately $2.5 million of recurrent expenditure was cut from the budget, leaving between $2.5 million and $3 million of recurrent expenditure to be reduced from the projected operating budget for 1997/98. Areas for reduction were to be identified by management during the course of the 1996/97 financial year and reported to the Council.

The CEO and management turned their minds to this needed reduction and reported to a meeting of the Councillors on 2 September 1996. It was this meeting which led to industrial problems at Darebin.

The above shows that from a fiscal viewpoint the CEO had successfully managed the City and had responsibly informed Councillors of the financial matters to be addressed in coming years.

With the exception of the strike period and the ongoing questionable activities of Councillors, Darebin City Council has operated in a normal manner. While no detailed audit was made by me I believe all statutory functions required of the CEO under the Local Government Act 1989 and all other Acts administered by the Darebin City Council have continued to be performed.

The CEO's duties have been performed in accordance with the CEO's Contract of Service.

A campaign implemented by the CEO to encourage and unite the Council and the staff in the positive performance of their duties has been successful in combating poor morale. At my invitation I met with a randomly selected group of staff. They expressed support for the CEO and for the style of governance which occurred during the time of the Commissioners. They expressed regret that Council was seen to be in disarray. I was told that problems were obvious from their internal viewpoint. The external notoriety made working for the Council difficult and stressful. At a separate private meeting I was advised that it had been suggested to some staff that their jobs could be threatened if they criticised the Council to me.

During the difficulties in September Mr Spiller advised the Office of Local Government that he was agreeable to the appointment of a Mediator. This indicates a positive and professional objective of achieving sound governance at Darebin. It was the Council which refused appointment of a Mediator after the Mayor had indicated he supported the idea to the Minister for Planning and Local Government.

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This Commission of Inquiry required the CEO to answer a substantial number of detailed questions which took time and effort and would have been distracting. My questions were answered quickly and fully. During the course of the Inquiry it was my impression that management of the city continued satisfactorily.

Prior to 1 September, Mr Spiller had undergone two performance appraisals by the Commissioners. In July 1996, the Mayor and the two Councillors on the Evaluation Committee conducted an appraisal. In all cases the maximum 15% bonus was paid to the CEO thus indicating satisfaction with his performance.

It is perhaps possible that Mr Spiller might have developed a better day to day relationship with the Mayor and Councillors. He is perhaps less skilled in that area than some others. However developing such relationships at Darebin would be extraordinarily challenging and I do not criticise Mr Spiller.

CONCLUSION - Terms of Reference No. 5: CEO's performance

On balance I conclude that Mr Spiller has conducted himself in a professional and proper manner and applied himself toward achieving good governance at the Darebin City Council.

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"Whether the affairs of the Darebin City Council are being, or have been affected, by any or all of the above matters and, in particular, whether these matters have had, or are likely to have, detrimental implications for the ongoing Council leadership of the organisation and the employment of staff at the Darebin City Council under accepted professional standards. "

The affairs of the Darebin City Council have been adversely affected by the action of Councillors. This unsatisfactory situation continues.


Some staff have left to work elsewhere with one reported as saying, "I am pleased to escape. I am fed up with the way they behave. " Attracting capable staft: particularly at senior levels, will be difficult until the reputation of the Darebin City Council improves. Obviously there are costs associated with staff leaving and replacements being recruited.

There was an improvement in the attitude of the Mayor and Councillors to the CEO after the intervention by the Minister for Planning and Local Government. Indeed the fact that this Commission of Inquiry was underway quietened things down. Some Councillors said to me that they welcomed my appointment as a chance to put the Council on a more normal footing.

While the presence of a Commissioner gave stability for the time being I have concerns for the future. Even as this Inquiry nears its end there are signs of ongoing difficulties. There are two fundamental structural problems at Darebin:

• First, factional political differences between Councillors, who at any time may vote on important Council matters along ideological and factional lines. At times the good governance of the Darebin City Council has been overlooked. Factionalism aggravated the period of industrial unrest and will continue in the future whenever difficult matters must be addressed. Also the factions themselves are unstable with outside influences at work. Uncertainty is increased by political deals regarding future Mayoral appointments.

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• Second, the merger of Northcote and Preston has been a difficult one, aggravated by personalities. The decision by Council to investigate the moving of staff back from Preston to Northcote clearly interfered with the duties of the CEO and management. It is up to him to locate his resources as is required to achieve Council objectives. This has been a costly exercise aimed at maintaining the political strength of Councillors in the Northcote wards. There is continuing uncertainty by staff about this, aggravated by the thought that should the factional balance change yet again pressure to "Return to Northcote" could re-surface.

Individually, the Councillors show concern for Ward matters, but problems have been highlighted when they have had to make a collective decision on a city-wide matter, which can lead to factional and geographical disagreement.

Perhaps over-riding the above is an attitudinal problem by Councillors demonstrated by the withdrawal of delegations of the CEO. During the time that I worked on this Inquiry no Councillor at Darebin seemed to understand the immense damage that such an action, even if well-intended, does to an organisation. It means a threat is always in the background "If Council has difficulty with the CEO then withdraw the delegations, take action, then restore delegations."

This is the antithesis of good governance. Once the Council as a whole or Councillors individually interfere in management, even slightly, then governance suffers and at times can break down, possibly seriously. Good governance of the Darebin City Council and other municipalities will continue to suffer unless such a threat is absolutely removed.

There is uncertainty which flows from the Local Government Act 1989. That Act requires the Council to approve the management structure. Staffing the structure and administering it is the responsibility of the CEO. There is fertile ground for misunderstanding here, as shown at Darebin.

Whilst the Darebin City Council in the past few months has attracted substantial publicity at political level and in the local newspapers, there have, however, been a number of achievements. To demonstrate that the City has continued to operate and achievements made the CEO was anxious that these be included in this report. They are available in the Archival material relating to this Inquiry.

Substantial managerial challenges exist now and lie ahead which require sound governance. The CEO lists the immediate managerial tasks as follows:

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• implementation of a realistic and positive Corporate Plan and Key Result Areas for 1997/98;

• finalisation of the Organisation Development Strategic Plan; • adherence to and more in depth planning on the long term capital

works program, including overall supervision of a mausoleum complex at the Preston Cemetery to the value of $20m.;

• fine tuning of recurrent expenditure in the long term financial model;

• maintaining existing levels and improving other service levels to the community;

• development of policy recommendations in numerous areas, including the Municipal Strategic Statement;

• establish the process for the next round of negotiations in relation to the second Enterprise Bargaining Agreement;

• preparing some of the in-house teams for the second round of market testing services, in line with CCT legislation;

• finalising the Information Technology Long Term Strategy; • continuing the Cultural Change Program; • developing customer service systems to a higher level for the

Darebin community; • provision of acceptable office accommodation for staff; • implementation of a Corporate Customer Service Improvement

Program, in line with the 5 Star Strategy; and • effective and timely performance management of individual

management and staff, as per contracts and/or Darebin City Council Performance Scheme.

The Darebin City Council has good and committed staff.. The area which collectively needs to be addressed is the role and behaviour of the Councillors. Some had previously been Councillors and find it difficult to cope with a revised view of their responsibility.

The reforms undertaken during recent years have aimed at management and have contributed to better governance. Unfortunately, the politically more difficult of improving municipal management at the Councillor level has not been tackled as yet. Substantial work and intellectual effort is required.

All Darebin Councillors must accept that local government is not an extension of a State political party's activities, whether the party be Labor or Liberal. Darebin Councillors must accept that their responsibility is to Darebin; they are not the opposition to the Liberal Government even though they individually have Labor Party affiliations. Until this is accepted by Councillors governance at Darebin will be unstable and good governance is unlikely.

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Intermixing of Municipal affairs and politics

There are now several factors at Darebin which together present as an ongoing unhealthy development which, I fear, could grow into a widespread system of abuse. The features are:

• councillors and prospective Councillors employed in the offices oflocal politicians;

• suggestion that Mayors tithe to the ALP; • fonnal factional deals regarding Mayoral appointments; • councils agreeing to pay excessive remuneration to Mayors; • municipal facilities being available for political purposes; • mayors making donations to local favoured charities; • councils funding the VLGA; and • labor Councils taking over the MA V.

Such arrangements affect the relationship between Council and a CEO. They certainly affect the governance of Darebin and if they become widespread will adversely affect other municipalities.

CouncU Elections 1997

On 15 March 1997 local government elections were held in Victoria. This marked the return of elected Councils and the retirement of Commissioners in most local government areas. I was told that 16 cities in the metropolitan area elected 'labor councils' By this it is meant that a majority and in some cases all Councillors are associated with the Australian Labor Party. This represents a further politicisation of local government. It has a direct influence on the MA V and VLGA. I was told that there is a plan for these Councils to dominate the MA V and for that organisation to co-operate closely with or merge with the VLGA. I was told the MA V with this orientation will ••bludgeon the Minister. He needs to watch his step."

Such sentiment is not a good omen for improved governance within local government.

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Is there a solution?

At this stage it is appropriate to consider what actions are possible to help Darebin move toward acceptable governance. Inevitably many people who have spoken with me have views on actions that should be taken. The media has been keen to speculate on what actions might flow from this Commission of Inquiry. Any action is the responsibility of the Minister for Planning and Local Government I now list and comment on the following actions which have been suggested:

The first three represent an increasing severity of action:

• Appoint a Mediator; • Appoint an Administrator; • Break-up the Municipality.

The remaining suggestions if implemented are unlikely to solve the governance problems at Darebin:

• Do not change anything; • Clarify role of Councillors and CEO; • More extensive use of Council Committees • Obtain a replacement CEO; or • Call new elections;

I comment on each of these suggestions:

Appoint a Mediator

During my time at Darebin there was stability. I was told that the mere presence of a Commissioner contnbuted to this stability. I fear that as soon as this Inquiry is concluded, before long, there will be further difficulties at Darebin.

Such instability is largely brought about by:

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• the external pressures brought to bear on Councillors at Darebin such that political outcomes are sought;

• the fact that some Councillors with local government experience have tended not to accept that the form of local government in Victoria has changed. They see the period with Commissioners as merely an interlude before they returned;

• the personalities of some Councillors, including their ambitions and resentments regarding events sometimes long gone.


Mr Spiller has not been able to establish himself so that he can contain these disruptive pressures so that Council works smoothly. I do not criticise Mr Spiller for this~ few people would have the requisite skills.

Dwing the final months of 1996, prior to my appointment, the Minister for Planning and Local Government suggested the appointment of a Mediator to be an intermediary between Council and the CEO. This suggestion was accepted by the CEO, and initially the Mayor, but rejected by the Council.

It is regrettable that despite the support of the Mayor, the Council rejected the appointment of a Mediator but not surprising when the personalities are considered. The political posturing of some Councillors meant that they were not big enough or wise enough to accept this commonsense straightforward proposition. It is not too pointed to say it was sheer bloody mindedness.

The appointment of a Mediator would have avoided this expensive time consuming Commission of Inquiry.

More importantly, if a competent respected Mediator had been appointed Darebin City Council could now be on the way to a stable productive future. A Mediator could increase the chance for Councillors to understand their responsibilities and for long term stability to occur.

This approach is being tried elsewhere. I understand that recently the City of Maitland in NSW has had difficulties and that a Mediator has been appointed there to help the Councillors and the CEO move forward.

Value could well be obtained by revisiting this suggestion. Dare bin Councillors need help.

Some substantial preparation will be required regarding the role of the Mediator. I understand that some work was done on this last year prior to Darebin City Council refusing to co-operate with the appointment of a Mediator.

In the following paragraphs I make some specific suggestions regarding assisting Councillors which draws to a considerable extent upon the experience and documentation of the Hobsons Bay City Council.

A. Councillors should be informed and reminded about the role and responsibility of Councillors. To help with this Councillors could:

1. be given a Councillors Information Manual similar to that given to Hobsons Bay Councillors. Particularly I suggest study of the

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section titled Governance Policies and Procedures; and 2. attend a daylong seminar with formal presentations on the following

subjects:

• A Vision for Darebin within the State of Victoria; • Governance and the legislative accountabilities of a Council; • Responsibilities of a Council; • Fulfilling the Expectations the Council's stakeholders; • How the Council and Management will work together; • A Code of Conduct.

B. Councillors should be given information along the lines of the Hobsons Bay Employee Handbook and Code of Conduct for staff. In that way a better understanding would be obtained of the role of management and staff in a large municipality. Hopefully through that Councillors will obtain a better understanding of their own role.

C. Councillors should individually give verbal expressions of goodwill and co-operation to the appointed Mediator.

I accept that some Darebin Councillors may be contemptuous of this approach. Indeed the suggestion could be rejected out of hand.

If Council as a whole again rejects this straightforward offer of assistance then I recommend that the Darebin City Council be dismissed as unworkable. This part of my report should be widely publicised with the statement that Councillors have irresponsibly refused an attempt to help establish sound governance at Darebin.

The Mediator should be appointed on a part time basis for say twelve months. If matters improve the attendances of the Mediator should decline with time. If the Mediator finds that (s)he is ineffective or that too much intermediation is required then I recommend that Council be then suspended as unworkable and an Administrator appointed until such time as the municipality can be returned to good governance. If such is not achieved within twelve months then the appropriate legislative process should occur to extend the time of the Administrator.

An important task of the Mediator would be to reinforce ongoing communication channels between Council, Councillors, the CEO and the Office of Local Government and the Minister for Planning and Local Government. The powers of Council flow from the Local Government Act 1989 for which the Minister is responsible. It would make a substantial contribution to good governance if the Mediator could inculcate an understanding of the powers and responsibilities of all involved in the

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difficult and important area of local government.

Under Terms of Reference No. 4, I mentioned the views put to me by representatives of the Preston-Reservoir Progress Association. Their submission includes the statement " .. if the State Government has a genuine concern in resolving this problem, it simply required mediation and skills development". It seems that the Preston-Reservoir Progress Association is not aware that it was Council who refused to have a Mediator. I hope that appointment of a Mediator would be acceptable to people associated with the Preston-Reservoir Progress Association.

Appoint an Administrator

It is only some twelve months since the Darebin City Council has had Commissioners. Appointing an Administrator after such a short time should only happen in the most serious circumstances.

There is no existing single event or practice which requires immediate suspension of the Darebin City Council. There is however a substantial ongoing instability which could flare up at any time and which corrodes good governance, day after day, month after month.

I am advised that the Council can be suspended for up to twelve months while an Administrator managed the City. After that, in the absence of legislation, an elected Council would be returned. Community resentment could arise from this action and I have no confidence that long term stability would be obtained.

While the situation at Darebin may not yet be so serious as to warrant this grave action it is a step which must be seriously considered, particularly if the appointment of a Mediator offers little hope of improvement.

Break-up the Municipality

There was widespread fear that in this report I might recommend breaking up the Darebin City Council and merging the parts with adjoining municipalities. Those mentioning it fell into two camps:

First, Conspiracy theory. The Government wants to make an example of Darebin as a warning to other Councils. Councillor Laurence even suggested an ulterior motive of making Darebin's cash reserves available to the Y arra City Council. I found this fanciful.

Second, Darebin is ungovernable "These are so many deep currents at Darebin; stability will never arrive", I was told by one person.

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After some considerable soul-searching I have decided I do not as yet support this pessimistic action. There may well be reasons for again reviewing municipal boundaries but I hope the suggestion that Darebin City Council is fundamentally ungovernable is not one of them. Darebin needs help. If the actions suggested above are implemented with goodwill by all concerned then the need to consider this option is reduced at this time.

I now list suggestions which offer little promise of solving the problems at Dare bin.

Do not change anything

Those who proposed this argued that while there have been difficulties at Darebin they have been slight. I was told:

• all was satisfactory until September 1996 when redundancies were inadequately handled by both Councillors and management;

• a strike occurred and the Councillors then acted to end the strike; • relationships between the Council and the CEO were strained

during this period and some heated words may have been said; • after the immediate problems were solved the Council formally

expressed confidence in the CEO; and • good relationships were cemented during a workshop in Geelong

in November 1996.

This description of the overall picture seemed to gain strength in the telling during the course of this Inquiry. When I first spoke on 24 December 1996 with Councillor Keirl it was not described quite so eloquently. By the end of the Inquiry it had been repeated many times almost to the point of becoming a threat to CEOs. "If Council has difficulty with the CEO then withdraw the delegations, take action and restore the delegations." I suggest such an attitude should not be left hanging in the air.

At the formal hearing Mr Hayes appearing for Crs Politis, Laurence and Keirl told me that "this Inquiry is about three or four months too late ... ... Council has moved on since the events of September and October. It was something of storm in a teacup". I was told that the problems at Darebin have been solved and no changes are required.

Councillors spoke with one voice, almost certainly rehearsed, when they said to me that there had been some problems but these had now been resolved. I was reminded that problems occur with any relationship and that difficulties usually provide the ground for a better understanding and improvement. The Mayor, Councillor Keirl believes that matters are under

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controL "Harmony, results and morale are now OK", I was told. Words to this effect were repeated by all Councillors.

On the other hand I was told that differences within Darebin Council are inevitable at any time; that there is not that much ideological difference now between ALP factions; that they are competing teams; that events at Federal and State level could soon spill into Council. This is made more probable by Councillors being employed in the offices of State Parliamentarians.

Early in my examination this "steady as she goes" approach had considerable attraction.

I regret that as my work at Darebin progressed I found myself moving away from this inviting straightforward proposal. There are two difficulties:

• First, some Councillors seem unable to restrain themselves from the minutiae of management and involvement therein. They have not sufficiently turned their mind to the appropriate split in role between management and Council. Elsewhere I have described threats made by Councillors Anderson and Laurence. Separately, the actions of those Councillors contribute to the ongoing instability at Darebin. Changes are required; otherwise before too long further problems will develop.

• Second, there is an underlying lack of trust between the CEO and some Councillors. The CEO has the thought in the back of his mind that some Councillors are "out to get him" and replace him with "one of their own". Unfortunately such a belief may be self-fulfilling. Even if both sides endeavour to co-operate with goodwill sooner or later some trigger will cause further disagreements, possibly of a major nature.

I find I am unable to share the optimism put forward on behalf of his clients by Mr Hayes that the Councillors and the CEO can "move forward and ensure that a healthy and positive relationship is in place".

I was also told by those who argue for the status quo that nothing illegal has occurred so no action is required. Good governance requires much more than that nothing illegal has happened. Municipal governments are large enterprises; they are complex and superior directed management is required at both managerial and Councillor level. Merely managing so that nothing illegal occurs is too low a standard. High levels of skill, probity, co-operation and diligence are essential.

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Both management and Councillors receive substantial rewards for taking on the task of directing and managing a city such as Darebin. The thrust of government initiated reforms has been to improve the quality of governance at municipal level.

There is room for substantial improvement at Darebin.

More extensive use of Council Committees

Some people suggested to me that governance at Darebin would be improved if the Council's Committee system was extended.

After the above disturbances the Darebin City Council appointed a Human and Industrial Relations Advisory Committee of Council to advise the CEO on Industrial Relations matters. Several Councillors have experience of one kind or another with Industrial Relations. I was told the idea for a Committee arose :from a belief by some Councillors that the CEO was weak in industrial relations and needed a forum in which Councillors could advise him. The Committee is to operate in a general way and not deal with specific matters which are the responsibility of the CEO.

The members of the Committee are:

• Councillor Royce Keirl Snr (Mayor) • Councillor John Anderson • Councillor Alison Donohue

Mr Spiller denied that he had shortcomings in the industrial relations area and indeed claimed success in the difficult area of local government over many years. He was however willing to recognise and co-operate with the Committee. I gained the impression that Mr Spiller's acquiescence in this area was as much in the interests of harmony than for any value he felt he could obtain. Indeed on being pushed by me I was able to extract :from Mr Spiller that in his view the Committee dealt with detail which complicated his management.

Both Councillors and the CEO said this Committee ts working satisfactorily.

The Councillors examined under oath and solicitors acting on their behalf spoke favourably of this Committee saying it removed the only area for potential difference between the Council and the CEO. They stated it was purely a policy forum. On the other hand a staff member informed me that the Committee had concerned itself with the details of advertisements regarding the availability of employment within the Council.

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The creation of such special purpose Committees by the Council is not good practice. Removing matters from the Council to a Committee does not change the nature of the matters being considered. In this case Industrial Relations are clearly the responsibility of management. Such a Committee can be misunderstood and/or misused. It is the responsibility of the CEO to manage the workforce and a Committee of this type is not appropriate; confusion in governance can easily occur.

If the Council forms a view that the CEO is not capable in this area then the solution is not for the function to be taken over by the Council. The operation of committees on detailed matters distract the Council from matters of greater overall importance.

Councillor Keirl said the committee was his suggestion while other Councillors believed the Committee was suggested by the Minister for Planning and Local Government. I have been advised that the Minister suggested this Committee in the context of a Mediator being appointed to work out any difficulties between Council and the CEO. The concept was that the Mediator would chair the Committee. This was and is a sensible pragmatic short-term device to overcome a temporary difficulty. As currently structured at Darebin the Committee is permanent and enables the Council to directly interfere with the work of the CEO.

Committees have the advantage of bringing together a breadth of experience. This singular advantage is soon overcome by their becoming unwieldy, time consuming, unfocused, captured by stronger individuals, lacking specified time goals and expensive.

Clari.fY the role of the Council and the CEO

There is uncertainty about the dividing line between the responsibility of Councillors and that of management. The boundary between policy and operating is seldom a clear one.

With a concerted voice the Darebin Councillors told me that the reason for withdrawing the CEO's delegations on 16 September 1996 was that Council was unclear regarding the precise delegations. It seemed advisable to withdraw the delegations while things were sorted out.

This reason smacks of having been cooked up after the event. Any ambiguities that existed did not require such drastic action. As described under Terms of Reference 2, I suggest the delegations were withdrawn so that Councillors could directly control the process and appease powerful entities outside the Darebin City Council.

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Nevertheless uncertainty about roles exists and such uncertainty made it easier for Council to act as it did. I suggest more work is required on the dividing line between elected Councillors and :full-time management. I say a little more about this in Part 4 of this report.

Much of this definition can be done by the Council and management taking a forthright commonsense approach. In addition I suggest the Office of Local Government could work in this area with a view to producing greater legislative certainty for both Councils and management.

A specific area of confusion is that the Council is responsible for the management structure while the CEO is responsible for appointing and dismissing staff and directing them. Council is and should be clearly responsible for setting its own program directions within its fiscal constraints. I suggest that it should not have a role in approving the structure; that is the role of the CEO. A structure should be created which enables the CEO, within budget, to achieve Council approved programs. The current arrangement leads to uncertainty and reduces the possibility of good governance.

Unfortunately I think it unlikely that the present problems at Darebin would be solved at this stage merely by any clarification and codification of roles.

Obtain a replacement CEO

In addressing the terms of Reference I have largely found that Mr Spiller has behaved in a proper and satisfactory manner. To round out the picture some further generalised comments are appropriate.

Council and the Chief Executive Officer

During his time as CEO at the Darebin City Council Mr Spiller has concentrated on achieving managerial efficiency which would result in an efficient cost effective operation. This happened during the time of the Commissioners and Mr Spiller is rightly proud of his achievements.

This is however too simplistic a view of the role of the CEO of a major suburban Council. Indeed the CEO of any large enterprise must achieve efficiency while also bringing about an effective working relationship with various audiences: Board, creditors, customers, employees, Unions and Government etc.

This is a difficult task with many complexities.

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Interworking with Councillors

As part of his managerial responsibilities the CEO has to be able to guide Councillors so that, within their perception of needs and approved policy, ongoing management of the City occurs. I mentioned above that boundaries between policy oriented Councillors and operating management need better definition. However the dividing line will always be blurred to a greater or lesser extent. No definition overcomes the need for active co-operation by well intentioned competent people. Ideally this should be as much through informal contact as at formal Council meetings.

The operation of Council committees also provides an opportunity for the Councillors and the CEO to get to know each other in a less structured environment.

Mr Spiller could perhaps have spent more time getting to know and understand individual Darebin Councillors and their specific perception of the needs of the City. This would not have been easy as evidenced by the refusal by the Council to attend a briefing workshop and the establishment of an organisational review without discussion with Mr Spiller. Such actions indicate a lack of trust and make informal co-operation difficult.

I spoke with CEOs, Councillors and Commissioners of other Councils where there was sound ongoing co-operation between management and the Council. All stated that they had put a lot of time and effort into defining their respective roles. Such was not the case at Darebin. Indeed as a staff member said to me that at Darebin:

"Councillors from previous Councils have returned thinking they can go back to their old ways. Things have changed; we have moved forward using modem management. This is good They want to return to the past."

Mr Spiller could have paid more attention to this wider role. Having said this it would not have been easy to achieve in Darebin. The only reason to sacrifice the present CEO is if there had been a complete breakdown in relations. All Councillors have said that they currently respect the CEO and no Councillor suggested to me that Mr Spiller should be replaced.

Comment

Over 27 years, Mr Spiller has worked for seven Councils as a Shire Secretary, Town Clerk or CEO and reported directly to nine Shire Presidents, nine Mayors and one Chairman of Commissioners. He told me that Darebin has been his most difficult assignment

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"taking into account the local community, personal and political agendas and the campaign of intimidation I have had to deal with. "

I was told several times that Mr Spiller's original appointment was bound to lead to difficulties. This was because he was previously CEO of the City of Preston which was one of the cities which became the Darebin City Council. Such an appointment was seen by some as implying a takeover ofNorthcote by Preston.

During mergers of municipalities instances did occur of CEOs "continuing on" after the merger; but it was unusual. In hindsight it might have been better if the probable friction within the new Darebin City Council had been recognised and a CEO with no previous contact been appointed. However that is looking backward and does not face the problem that in the opinion of those making the appointment Mr Spiller was the best appointee taking all factors into consideration.

My investigations did not give any evidence that Mr Spiller was partisan to staff of the fonner cities or to the particular areas. I did not study the matter in any depth but no complaint was made to me that he is or has been favouring one area over another.

It is my view that injustice would be done if Mr Spiller were sacrificed. Some people may have been able to handle Council better. The situation at Darebin is difficult where there are Councillors who seen to be ideologically driven and/or affected by outside influences. They are not amenable to changing pre-decided positions almost regardless of logic or expert advice.

Any other CEO would probably have run into the same problems as Mr Spiller unless chosen by particular Councillors. The only really acceptable CEO to all Councillors would be one with the same ideology as them. Unfortunately even that would not ensure tranquillity. A CEO perceived to be aligned with any one faction would soon face problems with other factions. It is also likely that an aligned CEO would be unable to competently supervise the financial and operational functions of the Darebin City Council.

While a change of CEO might ultimately be necessary I believe it would be unjust and unhelpful at this stage.

Darebin would not be helped by this course. Already the adverse publicity about Darebin and indeed the necessity to have an Inquiry into the affairs of the City means that it will be difficult to attract competent staff to the Darebin City Council for some time.

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Attempting to obtain a replacement CEO against the current background is unnecessary and would be difficult.

New Elections

There was considerable talk by Darebin Councillors about "Democracy". The penultimate paragraph of the joint submission by Darebin Councillors states:

"The inquiry represents a perversion of democracy. As stated above, in the absence of any crisis or scandal, it is for the people of Darebin to make their assessment of our performance as councillors and vote accordingly in March 1999. This Inquiry sets a dangerous precedent for other municipalities who may consider that elected councillors have any powers at all and acts as a disincentive for those considering nominating in future elections. "

It is a disgrace that this Commission of Inquiry has been needed; it is no perversion of democracy. Statements such as the above indicate that Councillors have the wrong understanding of their powers and responsibilities. They ignore that their behaviour is notorious and brings Darebin into disrepute. It might help Councillors if they were to consider whether their "in camera" factional meetings and committed agreements prior to Council meetings is a "perversion of democracy".

Far more important than a Commission of Inquiry discouraging good people from nominating is the widespread belief that being a Councillor of the Darebin City Council is not a respected office.

Council's powers flow from the Local Government Act 1989. Election as a Councillor is not a licence to behave as Councillors see fit. The problems at Darebin have brought notoriety to the City and tarnished local government in general.

There is no suggestion that the existing Councillors do not form a legitimate Council. While the behaviour of some Councillors has not been helpful I suggest that a stage has not been reached where value would be obtained from a re-election.

It is the behaviour of the Councillors which requires change. A new election at this time would be unlikely to solve the problem.

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CONCLUSION- Terms of Reference No. 6: Affect on Darebin


The return of an elected Council has been difficult for Darebin. At the beginning of this Inquity there seemed to be an improvement.

I would like to believe that any improvement has been based on the Council's desire to improve governance and maintain a good working relationship with the CEO. This was evidenced by the goodwill and intention expressed at the Councillors' retreat held in Geelong toward the end of 1996. As the Inquiry was extended into 1997 this positive impact was reduced with Darebin Councillors tending to revert back to their previous ways. I suspect that the period of relative improvement was brought about by this Inquiry. The situation is unstable.

Darebin City Council needs help.

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PART4

Miscellaneous Matters Arising from the Inquiry

During the Inquiry many aspects of municipal governance were mentioned to me; usually in a way critical of some practice or other. It is not unfair to say that governance at the Darebin City Council was not well regarded. Many criticisms are soundly based. Others however arise from a vagueness in the authority of Councils. When this vagueness is combined with incompetence or ideology or lax ethics then problems arise.

While problems at the Darebin City Council have to some extent been personalised many of the problems flow from fundamental weaknesses in the structure of local government in Victoria. I now mention some of the matters raised with me.

Wider Inquiry I suggest a wider Inquiry leading to recommendations for the most appropriate structure for local government in Victoria at Council level could be worthwhile, albeit politically sensitive.

Powers of Council

The powers of Council flow from the Local Government Act 1989. There is a description of these in Attachment 3. While those powers are very broad the responsible Minister has over-riding powers which under specified circumstances permit the Minister to suspend the Council and appoint an Administrator.

The Act also specifies the powers and responsibilities of the CEO. Also the CEO 's contract of employment broadly specifies the CEO' s responsibilities and powers.

The Local Government Act 1989 provides little detailed assistance as to the role of Council itself and of the break-up of functions between elected Council and management. A superficial reading suggests that the roles are clear; Council approves the structure and the CEO staffs and controls it. This simplistic view soon breaks down when detailed matters are considered. In this report I have criticised Darebin Council for withdrawing the delegations of the CEO. I do accept however that there are ambiguities, gaps and overlap in the Act which make the precise powers of Council unclear. More is said about this below.

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There is a perception among some community groups and some Councillors that a Council's powers are much wider than those specified in the Local Government Act. Some Councillors and community representatives act as though a Council has sovereign power. This belief, often sincere but at times manipulative, claims that because a Council is democratically elected it obtains much wider powers than is in fact the case.

Some believe that a Council's interpretation of the will of the community provides the sole basis for Council action. It is a short step from this to abuse and misuse of the trust put in Councillors. There is a tendency for some Councillors to believe they speak on behalf of the community whereas their personal power aspirations and biases are the real motivation. The requirements of the Local Government Act can be easily overlooked by elected Councillors during the everyday pressure of Council business.

There is a need to educate the community and prospective Councillors about the role of Councillors and management and their powers and responsibilities as specified in the Local Government Act.

Functions of Council

On page 1 of the Final report dated August 1995 of the Local Government Board "The Roles and Functions of Councillors" it is said the

"councillor's role is moving to overall responsibility for establishing and guiding policies, setting delivery standards and overseeing the performance of management. "

Councils are not obliged to agree with or adopt this view. I suggest it conforms with sound managerial practice. In depth formal consideration by Councillors at Darebin would be worthwhile. An ideological element comes into play in that Councillors with a strong sense of community may believe that involvement in the minutiae of Council management is part of their task. This need not go as far as being a "pot-hole" Councillor which was a description Councillor Tim Laurence derided. More damaging intrusion can occur where Council undermines executive management by involvement in such things as staff appointments, detailed organisational structures, office accommodation etc.

Undue attention to detail creates managerial confusion. It also produces a further serious difficulty. While the detail is being considered larger policy issues are put aside, delayed or confused. I give an example I was told about at Darebin:

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Street Crossings (Driveways)

A street crossing is the paved area between the public roadway and private property. It is commonly /mown as a driveway. The initial construction is paid for by the property owner. The crossing forms part of the capital improvement of the property. It has been common for many Councils to maintain driveways even though they are "owned" by the adjoining property. Obviously the need for repair could be a fertile area for disagreement between property owners and the Council.

At Dare bin, during the time of Commissioners an alternative policy was established; crossings were to be maintained by property owners. I was told that staff found this difficult to administer but implemented the policy. During the budget preparation no money was allocated for crossing repairs by the Council.

Soon after the return of an elected Council at Darebin a Councillor directly contacted a staff member and instructed that a damaged crossing be repaired. The staff member said he was not authorised to make the repair and that there was no funding for such activity. The Councillor mildly abused the employee.

The point here is not about which policy is correct; maintenance by the property owner or by the Council. The point at issue is that the Council is responsible for establishing policy. If the Councillor believed the policy of private maintenance was flawed then the matter should be reviewed at Council. It was wrong for the Councillor to attempt to direct a staff member in a matter which is contrary to policy.

It is essential that the Council as a whole and individual Councillors in particular continually look at the matters they are considering and ensure that they are of a broad policy nature and not of detaiL

Ibis raises the question; "What is the responsibility of the Council when detailed problems occur?" If a citizen complains about a pothole to a Councillor a discussion about "policy" will not solve the problem. In that circumstance the Councillor's responsibility is to ensure that management is informed. The repair should then occur within defined time limits and to defined standards. If these are not met then management is at fault. It is a Councillor's responsibility to "repair" the management not the pothole.

Because Councillors are often in the frontline of ratepayers' complaints it is essential that management is structured to service Councillors. This requires intelligent pro-active management in whom Councillors quickly obtain confidence. It could well be that management should designate a

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particular officer to be responsible for ensuring that matters raised by Councillors are inserted into the system in a proper and efficient way. The responsibility of such a "Councillor Service Officer" or "Councillor Resource Officer" should also include fully informing Councillors of the progress of detailed matters.

Also, if the community gains confidence in municipal management then complaints should come directly to the administration and not to Councillors. Complaints to Councillors are an indication that the system is not working as it should.

RoleofCEO

The responsibility of the CEO is specified in the Local Government Act. Attachment 3 of this report describes the break-up of powers of the Council and the CEO.

Also some CEOs have their duties spelt out in their Contracts. There is considerable room for confusion in this area. I suggest that attention be given to more clearly defining the respective roles of the Council and the CEO. This should include governance issues which could be encompassed by law or regulation such as:

• CEO to be responsible for appropriate organisation structure; • CEO to be responstble for appointments; • CEO to be responsible for all industrial matters; the Council not

to be involved in any detail, negotiations or tactics; and • Council not to deal directly with staff except with agreement of

CEO.

In addition the following matters should be considered:

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• the Office of Local Government to prepare a pro-forma standardised contract for employment of a CEO by a Council. The contract would encompass the requirements of the Local Government Act 1989. Some clauses would be optional for individual Councils and CEOs. If accepted such a contract would become well known and reduce misunderstandings;

• caucussing, block voting and predetermined decisions to be discouraged as undesirable;

• council decisions to only be made after appropriate debate and after management has formally advised the Council on the expected effects of any course of action;

Inquiry into Dare bin City Council

• council to address matters within its own boundaries; activities outside the boundary to follow some defined process. This includes joining external organisations, establishment of Sister City alliances, use of the title of Councillor and Mayor outside the State of Victoria;

• training for Councillors in civics on the one hand and planning matters on the other;

• work required by the CEO to lead the Council to understanding and defining role and mission of Council; and

• a Mediator available through the Office of Local Government to provide wise ad hoc counsel to CEO and Councillors on request. If more serious problems arise, where should Council and/or the CEO go to ensure efficient fair speedy non-confrontational resolution? Prima facie this also would seem to be conveniently placed within the Office ofLocal Government.

Relative Skills and Information

A continuing problem with any elected group is the turnover of elected representatives compared with the relative stability of management. This means that management are usually more highly skilled and certainly better informed about the affairs than the elected representatives. There is no solution to this dilemma; it is one of the costs of democracy. It does however require that both elected people and management are conscious and sympathetic to the issues confronting each other.

Dismissal of a CEO

During the course of this Inquiiy, the Minister for Planning and Local Government, Mr Robert Maclellan, MLA announced legislative change which would require Councils to notify the Government prior to dismissing a CEO. I am not aware of the detail of the legislation.

These changes were raised with me by some people in the context of the Dare bin Inquiiy. The comments made to me were along the lines that this was an intrusion into the democratic process and another interference of State Government in the affairs of local government. The following give the flavour of the comments made to me.

The Moreland City Council's CEO Mr Peter Johnstone was reported as saying 'The accountability of CEOs to their elected councils should not be diluted in this manner. To my mind that is a denial of democratic local government. I 'm one CEO who is quite happy to be fully accountable to his council and if they don't want me I don't want to work for them".

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On 7 March 1997 Councillor Tim Laurence sent a hand written note to the CEO and the Mayor of Darebin, "!... echo comments made by CEO of More/and and the VLGA. The press has comments of Peter Johnston (CEO of More/and) and will no doubt contrast these against Kelvin 's silence.

I believe proposed legislative changes now make this a state issue. It would be good if the Mayor could issue a statement on behalf of council re: local democracy. "

In my view it would not be helpful for either the Mayor or the CEO of Darebin to comment on CEO dismissal procedures while this Commission of Inquiry is in progress. Councillor Laurence should not make an implied criticism of Mr Spiller for not making a public statement. Subsequently this point was explained to Councillor Laurence who, to his credit, wrote to the Mayor saying "I now clearly understand why both yourself and Kelvin are not commenting on this issue . .. . If I am approached . .. by the local press I will recommend they speak to both the VLGA and the .MA V. "

This Inquiry has led me to the conclusion that it is entirely appropriate for the Minister for Planning and Local Government to introduce procedures which slow down and make public the dismissal of a CEO. This will contribute to good governance, fairness and cooler action. Special provisions on dismissal could apply if criminal or illegal acts are asserted. The notion that this is anti-democratic is incorrect; no democratic principle is involved.

The dismissal of a CEO or indeed any officer, as the occupant of a position must be separated from someone leaving because a position has been made redundant. At Darebin, employees ceased employment at short notice after their positions were made redundant. This is a quite different procedure to peremptory dismissal of a CEO because the Council is not satisfied with some aspect or performance or attitude. Of course, from the individual's viewpoint either approach is just as unhappy; it is the governance aspect I am discussing. Being made redundant is quite different to being sacked.

Put bluntly, Council should not have the power to dismiss a CEO at short notice. If such a power exists it is inevitable that the CEO will be inhibited in the way he reports to Council and manages the municipality.

I had a helpful discussion about this matter with Councillor Mike Hill, former Mayor of the Moreland City Council and Secretary of the VLGA. On democratic grounds he was opposed to any move to reduce the power of a Council to remove the CEO. He said the VLGA supported the

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Government's actions to employ CEOs under contract. He said the CEO is amply protected by that contract of employment.

However when Council and a CEO disagree I suggest it is not helpful if the environment is such that he can be summarily dismissed; even if receiving a monetary compensation under his contract. This was a fear that Mr Spiller said he had during September 1996. Such a fear must always be in a CEOs mind and inevitably affect his judgement and actions. This can have serious adverse consequences if a Council sets out on a course which is illegal or even merely ill advised.

Balance is required here so that a CEO is not assured that, come what may, he is secure. On the other hand where, as was the case at Darebin, there are differences between the CEO and some Councillors, the CEO's tenure requires protection. Particularly, protection from vindictive or hasty action is required so that the interests of both the municipality and the individual are protected.

Until 1993, Section 100 of the Local Government Act 1989 protected Designated Officers from arbitrary removal from office. The Act required that either Council or the Designated Officer could require the Local Government Qualifications Board to hold an Inquiry. This requirement was one of the many practices which were seen to lead to poor management in local government; it was too difficult to remove incompetent managers. This requirement was removed in the 1993 Local Government (Miscellaneous Amendments) Act. In his Second Reading Speech the then Minister for Local Government said:

"The Victorian legislation is also anomalous in offering protection to certain designated officers against removal from office. In effect, a Council cannot remove one of these officers without first going through a hearing before the Local Government Qualifications Board. The existence of this provision is said to have been useful in deterring a Council which might otherwise have applied unfair pressure to a designated officer. Today, however, there are grievance and termination provisions in the Federal award which covers Victorian Council staff and those provisions, along with breach of contract remedies, provide appropriate protection for officers. The provisions of the Act have become outmoded and the Bill will repeal them. "

The sentiments expressed here seem to have been largely satisfied in many Councils in Victoria. However the Minister was perhaps optimistic in hoping that the reform process would bring about a transformation in all areas.

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Memberships

Darebin City Council belongs to a number of organisations. To some of these fees are paid while for others Council staff or facilities are provided.

Darebin City Council pays membership fees to the following organisations:

Municipal Association of Victoria Victorian Local Governance Association Northern Region Waste Management Group Northern Regional Economic Development Organisation Merri Creek Management Committee Y arra Bend Park Trust

Total

$44,700.00 $20,000.00 $39,460.00 $15,000.00 $30,000.00 $32,110.00

$181,270.00

As discussed in this report the Darebin City Council's decision to leave then rejoin the MA V and join the VLGA caused tension between Council and management. The method of making the decision is mentioned above.

I thought I should inform myself to some degree about the VLGA. I questioned Councillors and staff about the services provided by VLGA. The staff informed me that they were not aware of any benefits from the membership. When I asked Councillors the only definitive reply came from Councillor Anderson who said "a variety of seminars, provides written information, provides a variety of services, albeit on a small scale".

I had short useful discussion with Cr Mike Hill, Secretary of the VLGA. He said VLGA is non-political and intent on defending and improving local government. It was born during the time of the Commissioners and was incorrectly seen by the government as anti-reform and anti-Liberal party. He said he and others are ALP members but VLGA also has nonLabor party members including a Democrat Senator.

He said VLGA was originally funded by individual subscriptions. Now that elected Councils are being returned their finances have improved with Geelong, Moreland, Darebin, Y arra, Stonnington and Port Philip City Councils having joined. With new Councils recently elected VLGA hopes for more members, including country based Councils, and better finances which will enable it to be more active.

I believe Cr Hill to be sincere and forthright when he said the VLGA' s primary objective is to train and inform Councillors and to act as "ThinkTank" for local government. He said VLGA is filling a gap; government

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should have done more to inform Councillors of their role; particularly with the large changes that have occurred.

Cr Hill said the VLGA strongly supports much of the government inspired restructuring including the boundary changes. The larger municipalities make local government much stronger. He made a tantalising comment that at State Government level "Planning" and "Local Government" Departments should be quite separate. When I asked if at local level he thought "Planning" and "Governance" should be separated he was vague in reply.

Intimately Cr Hill would like to see the VLGA link up with the MA V which he asserted has lost its way and is moribund.

I believe Cr Hill when he says that from his viewpoint VLGA is non· political. However I think the statement is more a hope than a fact. I did not speak with many people about VLGA. Of those who made comment there is a strong perception that it is a fellow traveller with the Australian Labor Party. This perception of political partisanship reduces the credibility that Cr Hill would like it to have. The objectives stated by Cr Hill are proper and sound; I agree that Councillors need training. However many people believe VLGA has a hidden agenda and that it will adopt a stronger political direction if more Councils join and improve its finances.

Organisations to which Darebin Council belongs and does not pay membership fees are:

• Metropolitan Transport Forum; • Darebin Ethnic Community Council Inc; • East Preston Community Health Care Centre Inc; • Darebin Creek Committee; • Police Liaison Committee; • Preston Skill Committee; • Sullivan Indoor Centre Advisory Committee; • Inner Group Apprentices; • Committee ofManagement· Community Accommodation

Support Team Inc.; • Project Group- Aborigines Advancement League Inc Vie; and • Darebin Historical Project Committee.

Council minutes of 27 May 1996 have a Council Resolution moved Councillor Anderson, seconded Councillor Kelly "THAT the Darebin City Council join the Australian Local Government Nuclear Free Zones and Toxic Industries Secretariat and that a delegate to this organisation be appointed at the next Ordinary Council Meeting" I am advised that to

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Inquiry into Darebin City Co~mcil

date no payment has been made to this organisation and Darebin has not selected any particular Councillor as a representative at this stage.

Membership of organisations can be misused. Perhaps some legislative guidelines are required.

Rats in the Ranks

Local government is not held in high regard in Australia including Victoria. In "The Age" on 15 February, 1997 a leading columnist wrote briefly about the ABC documentary Rats in the Ranks. This television program about the 1994 campaign for the election of the Mayor of the Sydney suburb ofLeichhardt had been shown during the week. The review said it is a:

"brilliant documentary that depicts the behaviour of elected Councillors in all its true awfulness. " ... "It is a convincing argument for, if not the total abolition of local government, at least for a drastic restructuring of it so as to weaken and disperse its powers. Local government is neither close to the people, nor responsible to them- rather it tends to become the captive of small-time hacks and busybodies bent on petty selfaggrandisement. "

This is a serious indictment of local government and regrettably the governance at Darebin during 1996 feeds this view. This squarely raises the question as to whether some alternative form of Local Government is possible.

Alternative Governance

I first make an introductory comment. I found that strong advocates of local government are fiercely defensive and soon turn personally critical if a suggestion is made that local government can be improved. The cry "defend democracy" is soon heard. Anyone seriously debating changes in governance is often seen as an enemy of local government. I now permit myself a personal indulgence by saying that I am a strong believer in the need for local government. However my experience at Darebin and elsewhere leads me to suggest that local government needs to change; otherwise in the shorter or longer term it will not survive. The perception of local government exposed in the Television Documentary "Rats in the Ranks" is widespread. Sadly and ironically the "defend democracy" voices may be hastening the very thing they fear.

My Darebin experience has led me to the view that further ongoing and substantial change is required in the way local government works in Victoria. Recent changes have largely affected management and the

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modus operandi. They have not looked at the bigger question of the fundamental role of local Councils. At an IP AA Conference on 21 November 1996, Mr Jon Hickman, Deputy Secretary, Department of Infrastructure said:

" .. we can also look at whether there might be a better system of local governance ..... Clearly there is some significant level of disaffection and/or dissatisfaction with the current system. Low voter turnouts and the calls in some municipalities for the retention of Commissioners are evidence of this.

We might look at other systems around the world to see if there are other ways of doing things that result in democratic participation in governance, higher levels of satisfaction for customers and more efficient - but still accountable - service delivery. We may have the best system in the world but it would not hurt to confirm this with an open-minded examination of the alternatives.

The ongoing challenge to local government is to demonstrate that it adds value for the overhead costs that it generates- to demonstrate that its efforts are valued, not by the cognoscenti who are part of the system, but by the broader community who are concerned with the efficient and seamless delivery of the services which they value and pay for. "

There is a fundamental weakness, or really three weaknesses, which relate to the inevitable and natural human proclivities of elected Councillors. These are:

First, what Councils "do" is fascinating to all; the detail of management is interesting. Detailed proposals, often in the form of a complaint or to satisfY a perceived community need, are put forward often at short notice. Implementation is often simplistically viewed.

Second, to many Councillors the money amounts are vast and distant from their personal experience. Amounts spent on a project here or a special consideration there are small in relation to the total amounts managed. A small rate increase and/or borrowings readily cover extravagance or mistake or general inefficiency. Imbalances from one municipality to another are overlooked, tolerated or hidden, sometimes for decades.

Third, there are few system checks and balances as exist for most other organisations. A competent CEO can keep Councils "in line"; on the other hand such a CEO can easily become manipulative and too powerful. The Local Government Act and the Minister for Planning and Local Government provides some guidance and necessary restraints. However any action by a State Government soon meets the "Defend Democracy"

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Inquiry into Danbin City Council

cry. It is strongly argued that regular municipal elections restrain Councillors but this is easily proven wrong.

On any scale a city the size of Darebin is big. If all Councils in Victoria are considered as a whole they comprise a very large economic unit. Local government is a very large employer and a major service provider. On the other side municipal rates are one of the major recurring imposts on both residences and businesses. Whatever be one's ideology on the role of local government I believe there is a reasonable agreement that cost effectiveness, efficiency and probity should apply.

Optional Commissioners

While most people I spoke to welcomed my Inquiry there were a number whose views can be reflected in the following:

"Over the years we have had good and bad Councillors and that will continue. Overall given time we can sort things out. We don 't need an outsider interfering. "

I have turned my mind to this question. Do subsequent elections indeed sort things out? Is not the history of local government elections that politically active individuals can gain control of a Council and continue to be elected in succeeding elections for extended periods? This conforms with common views of democracy but may not be in either the short or long term interests of the municipality.

The larger municipalities formed recently in Victoria make it more likely that more formal organised structures, community groups, sometimes single purpose, quasi-political or actually political (as at Darebin) will contest elections. These groups will probably be better funded and at times may be able to achieve control for long periods. If several contiguous municipalities have a common political flavour then they could exert very significant pressure on State and even Federal government.

The suggestion was put to me that there should be more inbuilt systemic control on elected Councils between elections. In Australia and elsewhere higher levels of government have bi-cameral houses and indeed a governor with reserve powers. These all restrain government from excesses. Democracy does not imply untrammelled action until the next election.

At local government level I was given no practical suggestion about how such an inbuilt check might be obtained. All suggestions I received seem to have inbuilt bureaucratic delays and red-tape. It would be widely accepted that introduction of further law-making levels would not be appropriate.

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Perhaps therefore some other type of review procedure; either for crisis or for routine might be required. It is interesting that when the then newly elected Kennett Government sought widespread change within Victorian Local Government that the appointment of Commissioners was seen as necessary. The changes were broadly directed at managerial and organisational practice. I believe that it is more or less accepted that Commissioners across the State competently performed their task and that the State is better for the period that they were in office. Darebin Councillors objected to Commissioners on ideological grounds.

In due course the Commissioners retired and elections took place smoothly. There has been no suggestion of any long term breakdown in democracy.

The experience of my appointment at Darebin is worth looking at. It was suggested to me several times that the very fact of my appointment had caused the Darebin Council to settle down and begin operating in a more normal manner. A more low key appointment of a Mediator would probably have achieved a similar outcome at substantially less cost.

We can perhaps learn from recent actions concerning the Melton City Council. Currently the City is run by government appointed Commissioners. Previously Melton had a long period of instability in its elected Council. Such was the popularity of the appointed Commissioners that a movement developed within the City for their term to be extended by two years, instead of an election being held. There was a noncompulsory postal referendum and 26,000 voters responded. This was approximately 60% of eligible voters. Seventy percent were in favour of retaining Commissioners. There were claims that this was "not democratic". However giving the people a choice of the form of government instead of merely limiting the choice to candidates is not necessarily undemocratic.

Perhaps this points to an alternative. At each Council election voters could be asked whether instead of an elected Council they would prefer that Commissioners be appointed.

When a Council election is held voters could be asked whether they wish the city to be administered for the next three years by government appointed administrators. If the answer to this is negative then the ordinary selection of candidates could proceed.

It is pure guesswork as to whether this would help Darebin. I was told that the period with Commissioners was stable, publicly accepted and with satisfactory achievements. After the election there has been instability. It

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could be that a majority of voters might have favoured being offered the choice of continuing with Commissioners. Such an ongoing electoral "threat" might curb the actions of some Councillors.

Radical Change

Unfortunately the above suggestion does indeed remove democratically elected representatives; albeit for a short time. Perhaps a better (or additional) approach would be to always retain Councillors but to elevate their role.

In the above I said that there is a disparity between the skills of elected Councillors and professional management. It is a continuing problem which is one of the costs of democracy. The problems produced by this may however be systemic and perhaps a revised form of municipal governance is required. Councillors have a strong personal interest in the existing system; it gives them prestige, an absorbingly interesting occupation, power to incur detailed expenditures, power over management without the discomfort of being answerable in any substantial way.

This power over management means that Councillors seek to direct. Even if Council is held together by a competent Mayor it can and often does result in the ideologically driven, the idiosyncratic, the power hungry and the incompetent Councillor being unduly powerful. During Council deliberations achieving a decision means that these people are deferred to. This deference often arises from a need to make a decision on an operating matter. Compromises are reached which are often expedient and reduce rather than enhance good governance.

I have only had time to think superficially about this but wonder if Councils should be restricted by legislation to the very large matters of municipal governance. The objective would be to elevate Council and remove it from all aspects of operating. A very small permanent staff under a CEO would serve Council. All operations of Council would be managed through a quite separately constituted "Municipal Corporation" or be outsourced. There would be defined practices and contracts for delivery of all Council services. Council expenditure in its own right would be very small.

Other issues include such matters as:

Direct election ofMayor instead of from Councillors; (very important) A mixture of elected and appointed Councillors; A mixture of ward and council at large Councillors.

Changes such as this would enable Councillors to concentrate on the large

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issues of directing their Cities for the :future.

Sister City Relationships

Many cities have "Sister City" arrangements with cities in other countries. These range from the simple to elaborate. Such associations can incur costs and obligations; sometimes substantial. While some relationships have a logical or cultural or trade-related basis others seem to depend on chance and are of a ad hoc nature. Value is not assured and should be care:fully assessed both prior to making the arrangement and :from time to time.

I made no enquiry about those being established in the Philippines by the Darebin City Council; their basis, costs and advantages. It would seem to be advisable for some general guidelines regarding such relationships to be established.

Emoluments, Expenses and Travel

At Darebin the allowances paid to Councillors and the Mayor have been properly approved. As mentioned above there was confusion as to whether Darebin the Mayoral allowance was pre or after tax. In Australia pre-tax salaries are used. I suggest pre·tax this should be routine for all Councils.

At Darebin maximum level of expenses has been set. Some Councillors have chosen to use Council credit cards when incurring such expense. For reasons which were not explained to me there seems to be concern by some people about using credit cards. The concern should be around the nature of expenditure rather than the method of payment.

I was surprised that travel both overseas and interstate, sometimes including spouses, for officers and Councillors can be approved by Councils. I do not seek to be petty or penny pinching but it is easy to wonder about the value municipalities receive :from many of these expenditures. Some broader policy in this area might be worthwhile .

All expenses covering cars are provided to Mayors. While this seems reasonable within the local area it is questionable whether the costs of intra and interstate costs should be routinely covered.

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Remuneration of Councillors

Some Councillors at Darebin and also Councillors in other cities (past and present) suggested to me that I should take the opportunity in this report to encourage government approval for an increase in remuneration to Councillors. Alternatively, or additionally, or as a device it was suggested Councillors should receive additional rewards for serving on Council Committees. I was told of the long hours worked by Councillors both at the Town Hall in formal and informal meetings and also in the municipality. Long hours are certainly part of a Councillor's life in Victoria. Some Councillors said it was a full-time task and the remuneration should reflect this.

The incoming Mayor of Darebin Councillor Nazih El Asmar has stated that he will work full time as Mayor and has given up his previous employment as an Electorate officer with a local Member of State Parliament. Public comment has been made by the outgoing Mayor, Councillor Royce Keirl Senior about the long hours involved. He stated he attended over 500 functions while occupying the position of Mayor. It is reasonable to question whether all those attendances assisted the City of Darebin, its residents or ratepayers. Could it be that those attendances were more to feed the self-importance of the Mayor? Many of the functions were not held anywhere near Darebin; indeed some were in the Philippines.

The hours worked are more a choice of Councillors than the requirement of the job. I suggest that the time spent on Council matters could be reduced if Councillors encouraged management and staff to perform much of this work. Time spent at the Town Hall would be reduced if Councillors disciplined themselves regarding the matters they consider.

I suggest remuneration should be set at a level to cover the myriad of expenses incurred by Councillors in going about their task. Being a Councillor should not be seen as akin to employment and councillors should not be remunerated on that basis.

Councillors on Boards

Inevitably, I believe, Councils in future will provide much of their services through corporatised and/or privatised entities. Council may have 100%, a controlling or minority interest. Such corporations will be directed by a Board of Directors with the skills required for that entity.

Some Councillors have suggested to me that Councillors must be members of such Boards "so that the interests of Council and citizens are ensured."

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Associated with this was the suggestion that Board fees would be paid personally to the Councillor. I do not support this idea. Councillors are elected to head the municipality. The act of being elected does not convert a person into a director or manager with the skills required to take on onerous responsibility and associated liability. Boards should comprise people with the skills required to lead the organisation; membership should not arise ex-officio from the position of Councillor.

Communications and Publicity

External

This Commission of Inquiry received little publicity in the Melbourne press. In Darebin however there was continuing speculation in the local newspapers. There is an aggressive coverage of Council issues in Darebin with Councillors often being quoted both on and off the record. During the course of the Inquiry I chose not to provide information to the press.

I suggest with the report now finalised that it is important to explain its findings. One of the difficulties at Darebin seems to be community uncertainty about the role of the Council. Interest in this Commission of Inquiry might be capable of being exploited so that some general community education is provided. There are a number of lessons from the Darebin experience which have general applicability in local government.

Internal

The Commission of Inquiry is obviously of interest to Darebin Councillors, CEO and staff. I suggest that thought be given to explaining the findings so that they are understood. Emphasis could be placed on the requirements of relevant legislation, roles of Councillors and management, and general and fiduciary respoDSibility of people in positions of trust.

Role of Council's Legal Advisers

At the formal hearing all Councillors were represented by legal advisers. I was also assisted by Counsel. No counsel appeared on behalf of Council itself.

In essence this Inquiry was concerned with the roles of Council and the CEO and the inter-relationships between Councillors and the CEO. In such circumstances there is fertile ground for the legal advisers to Council, individual Councillors and the CEO finding that they have a professional conflict. Such conflict could arise from previous work done for Council. There is also a potential problem, indeed it may already have arisen at

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Darebin. If Council's regular legal advisers are used by any party it is possible, indeed likely, that longer term ongoing relationships will be affected. Some guidelines in this area to assist legal advisers, Councillors and management might be helpful

Costs

Legal Representation

At the formal hearing Councillors who were summoned were represented by legal advisers who were paid by Council.

Mr Spiller was also at the hearing and his legal adviser Mr Murray Baird of Moores Solicitors asked to speak and to cross-examine witnesses. This was refused.

After the hearing Mr Baird wrote to me advising that he has been advising Mr Spiller and asked that I recommend that the legal costs of Councillors and Mr Spiller be met by the Council. Mr Baird's letter seemed to be addressed to the formal hearing. There is however a larger issue. Council has been incurring fees arising out of the matters relevant to this Inquiry both on its own behalf and for Mr Spiller since the last quarter of last year. Some guidelines are required as to when Council should meet legal expenses either on its own behalf, on behalf of individual Councillors or on behalf of the CEO. As matters stand when there is a difference between Council and CEO both parties understandably require legal advice. That advice is paid for by the City. There is something unsatisfactory from a ratepayer and governance viewpoint for costs to be incurred because parts of the municipal structure are in conflict.

Witness Expenses

At the hearing Counsel for some witnesses who had been summoned asked for reimbursement of costs associated with appearing. I stated that I was generally sympathetic to witnesses receiving expenses but would need to seek advice from officers of the Office of Local Government.

I have done that. At the same time three issues were defined:

Firstly, with the exception of Councillor Keirl, Councillors who were summoned (Councillors Anderson, Bilias, Laurence, Politis) did not make arrangements to meet me privately in the office provided for me at Darebin. It would have been much more convenient and less costly if they had seen their way clear to informing me in that way. Indeed I consider that the duties of a Councillor, and the allowance paid therefore, encompass this activity. I was therefore surprised to be asked to approve

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payment of witness expenses.

Secondly, Councillors who were summoned were legally represented and the legal fees incurred are being paid by the Darebin City Council. If it were in my power I would require that Councillors summoned to appear (other than Councillor Keirl) would personally pay for the legal expenses so incurred.

Thirdly, Councillors El Asmar, Donohue, Kelly and Tsitas met with me at Darebin without any formal summons. If they incurred expense in attending then some minor injustice occurs if the less co-operative Councillors receive witness expenses.

I have therefore decided that Councillors Anderson, Bilias, Keirl Senior, Laurence and Politis should be reimbursed for any direct out of pocket expenditure incurred by them in attending the hearing under summons. Such out of pocket expenditure is to be substantiated by written receipts.

Inquiry Costs

The costs, direct and indirect, of this Inquiry have been substantial. Direct and indirect costs have been incurred by the Office of Local Government and by the Darebin City Council. Many people have given their time and advice to me without seeking payment. Most matters dealt directly with Darebin but some matters in this part of the report dealt with wider aspects of municipal governance. I have therefore decided that not all costs should be born by the Darebin City Council.

I accordingly Order and Direct pursuant to Section 212 (3)(b) of the Act that the sum of$100,000 be paid by the Darebin City Council to the Office of Local Government on or before 15 July 1997 in respect of the costs of this Inquiry.

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Acknowledgements

I thank all people I encountered during this Inquiry. All, including all Councillors at Darebin were courteous in their dealings with me.

An Inquiry of this type placed a substantial load on the CEO of the Darebin City Council and his personal staff. I thank them for the prompt and efficient way that they provided facilities for me and answered my many queries in an environment which would have been difficult.

Within the Office of Local Government I was assisted by Ms Sue Maclellan whose knowledge of history. practices and legislation was invaluable. Within the Department of Infrastructure I thank Mr Jon Hickman and Mr Brian Duffy for their ready availability and helpfulness in explaining Local Government practices to me.

David L Elsum AM COMMISSIONER

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ATTACHMENT 1:

Chronology of Events

DATE INFORMATION

2 September The CEO's report on the Organisational Restructure was presented to an informal discussion and information session of all Councillors except Councillor Laurence. A show of hands unanimously supported the CEO's report and subsequent action. Redundancies were discussed and agreed.

3 September Affected staff advised of their redundancies, which took effect immediately

5 September Councillors Anderson, Bilias and Politis publicly distanced themselves from the decision made on 2 September.

6 September Membership of the Victorian Services Branch of the Australian Services Union took strike action.

It was suggested to me that the Union was encouraged by Councillors publicly distancing themselves from the redundancy program. The CEO advised the IRC of the dispute and requested the matter be heard in an attempt to resolve all the issues.

9 September Industrial Relations Commission Hearing.

10 September MEU Victorian Branch joined the Victorian Services Branch of the Australian Services Union in imposing bans, including the non-collection of street litter bins.

11 September Industrial Relations Commission Hearing.

13 September CEO requested the Union to lift the bans in order to negotiate the outstanding issues. The request was not accepted by the Union.

16 September CEO again requested the Union to lift the bans. The request was not accepted.

Special Meeting of Council, which purported to withdraw the CEO delegations in relation to staffing and industrial matters.

17 September Second Special Meeting of Council dealing with withdrawal of delegations and offering reinstatement of 8 weeks to those employees made redundant, with the view to identifying other • work opportunities for the longer term.

i

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18 September The Mayor and Cr Donohue negotiated directly with the Union.

Although the Council did not resolve formally for the Mayor and Cr Donohue to negotiate with the union officials on the Council's behalf, the CEO was advised by the Mayor that they did so with the agreement of Councillors.

The negotiations that were undertaken by the Mayor and Councillor on behalf of Council included other matters which the CEO and his Management Team had been negotiating with the Shop Committee and union officials for some time. This made the negotiations complex, confusing and led to an ill-defined outcome.

The confusion was highlighted at a later time when management discovered that the recollection of union officials about the agreement differed to that reported by the Mayor and Cr Donohue.

Throughout this period, discussions took place between other Councillors and union officials.

18 September The Minister for Planning and Local Government requests the Mayor to see him.

19 September Approximate date when bans were lifted by the Union.

20 September Third Special Meeting of Council reinstating delegations to CEO, following a request from the Minister to see the Mayor.

A joint working party, including the CEO, management, union organisers and representatives of the shop stewards met on seven further occasions to develop an overall memorandum of understanding in relation to a package of industrial matters, including redundancies, payment of gratuity scheme entitlements, employment conditions for post-amalgamation employees, anomalies in employment conditions for former Northcote and Preston employees and compensation payments . for those who chose to move from a 35-hour to 38-hour week through Local Area Workplace Agreements.

21 September Interview by Bill Hartley on 3CR with Cr Tim Laurence.

24 September Interview by Steve Price with Cr John Anderson on 3A W

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• 24 September Mayor, Cr Keirl met with Minister for Planning and Local Government, the Hon Robert Maclellan, MLA and the suggestion of a Mediator was raised.

26 September The CEO advised Mr Jon Hickman, Deputy Secretary, Department of Infrastructure that he was agreeable to the suggestion to appoint a Mediator. A name was agreed.

30 September Meeting of Mayor and Councillors with Secretary of VLGA, Cr Mike Hill, Mayor, Moreland City Council, the VLGA Solicitor and Executive Officer. It is understood that this was a caucus meeting. The CEO had no knowledge of it until he received a phone call from Cr Mike Hill following the meeting. The CEO advised Cr Hill that it was not appropriate for him to be speaking to a third party in the absence of any discussion with the Mayor or Councillors.

8 October The CEO and Mayor met with Mr Jon Hickman Deputy Secretary, Department of Infrastructure at which the Mayor indicated on behalf of the Council that they would not accept any Mediator suggested by the Office of Local Government.

16 October Special Meeting of Council at which resolutions in support of the CEO were carried. There were a number of amendments and varied motions which seem unimportant to an outsider. The final outcome was that motions of confidence were passed. Factional voting occurred.

28 October The CEO wrote a detailed memo to the Mayor in relation to the unofficial leaking of some documents from the Auditor's Report.

26 Mass meeting of union membership which adopted the November negotiated IR package.

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AITACBMENT 2

Curriculum Vitae of Kelvin Spiller

Darebin City Council- ChiefExecutive Officer June 1994 to Present 1989 to 1994 City of Preston- Chief Executive Officer- Local Govt Authority

& Electricity Distribution Business City ofEssendon- Manager Corporate Services/Town Clerk City ofNewtown- Town Clerk

1986to 1989 1984to 1986 1976 to 1984 1972 to 1976 1968 to 1972 1968

Shire ofBannockbum- Shire Secretary Shire of Corio - Finance Manager Shire of South Barwon - Administration Officer Commonwealth Government- Stores Supply & Tender Board Officer Commercial Bank of Australia - Bank Officer 1967 to 1968

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EDUCATION/QUALIFICATIONS

Masters Degree in Business Management, RMIT - 1991 Graduate Degree in Management, RMIT- 1989 Diploma in Business Studies (LG), RMIT -1976

PROFESSIONAL MEMBERSIDPS

* * * * * * * * *

Fellow of the Institute of Municipal Management (F1MM) Fellow of the Australian Institute of Management (F AIM) International Institute of City Managers (ICMA) The CEO Circle Australian Institute of Company Directors (AI CD) Australian Psychologists Press Professionals Club Committee for the Economic Development of Australia (CEDA) USA National Business Incubator Association (NBIA) Australian & New Zealand Association of Business Incubators

ADVISORY COMMITTEES

*

*

Preston & Northcote Community Hospital - Ethics & Research Committee

Victorian Employers' Chamber of Commerce & Industry -Tourism & Hospitality Committee

BOARDS (CURRENT)

* * *

LaTrobe Technology Enterprise Centre (Business Incubator) Board LaTrobe University R & D Park Board Civic Mutual Plus Insurance Board

BOARDS (PAST)

* *

Preston Electricity Distribution Board Preston & Northcote Community Hospital Board


ATIACHMENT 3

This attachment with minor change was written by Helen Harbison, Legislation Branch, Department of Infrastructure

Council Administration

THE ROLES AND FllNCTIONS OF THE COUNCIL AND THE CHIEF EXECUTIVE OFFICER

LEGISLATIVE REQUIREMENTS:

The Local Government Act 1989, common law, contract law and industrial law govern the relationships of the individuals involved in Council administration.

Coundl:

A Council must establish an appropriate organisational structure. In doing so, it must appoint as many members of Council staff as are required for the performance of its functions and the exercise of its powers. Council may only appoint a natural person (not a company) to be a member of Council staff.

A Council may only appoint a person to be its Chief Executive Officer (CEO) after it has invited applications for the position in a notice in a newspaper circulating generally throughout Victoria and has considered all applications received by it that comply with the conditions specified in the notice.

The contract of a CEO cannot be renewed. At the end of the current CEO's contract the Council must again externally advertise for a new CEO. However, the Council may enter into a new contract with an existing CEO after it has complied with the requirement to invite applications and has considered all applications received.

At least once each year a Council must review the performance of its CEO.

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Conduct of Councillors (together they constitute the Council):

Councillors should ensure that they undertake the duties of the office of Councillor in the best interest of the people in the municipality and faithfully and impartially carry out the functions, powers, authorities and discretions vested in them under the Act or any other Act to the best of their skills and judgement.

The Act sets out some of the principles that should be followed by a Councillor. Councillors should have particular regard to:

• the need to facilitate accountability at all levels within the organisation; • declaration to undertake the duties of the office of Councillor in the best

interest of the people in the municipality and to faithfully and impartially carry out the functions, powers, authorities and discretions vested in the Councillor;

• the duty to ensure efficiency and economy of operations and the avoidance of waste and extravagance;

• avoiding improper use of information acquired as a Councillor to gain directly or indirectly a pecuniary advantage for himself or herself or for any other person or with intention to cause detriment to the Council;

• pecuniary interest including provisions relating to maintaining a register of interests of Councillors, members of special committees and certain officers of the Council;

• conduct of open meetings, including the requirement to vote at meetings; and

• open tendering.

Councillors are responsible for:

• as local representatives, playing a major role in the communication process between the Council and constituents as well as addressing the needs and aspirations of the people in the area and translating these into appropriate service standards;

• regularly monitoring of the performance of the CEO; and • approving the budget, setting rates and charges and monitoring the

overall financial performance of the Council.

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Chief Executive Officer (CEO):

The functions and powers of a CEO are prescribed in Part 4 Division 3 of the Local Government Act 1989. In accordance with the legislation, the CEO is to be responsible for:

• ensuring that decisions of the Council are implemented without delay; • the day to day management of the Councils operations in accordance

with the corporate plan; • providing timely advice to the Council; and • appointing, directing and dismissing the Council's staff.

Responsibility for the conduct of staff lies with the CEO.

A Council may only appoint a person to be its Chief Executive Officer (CEO) after it has invited applications for the position in a notice in a newspaper circulating generally throughout Victoria and has considered all applications received by it that comply with the conditions specified in the notice.

The contract of a CEO cannot be renewed. At the end of the current CEO's contract the Council must again externally advertise for a new CEO.

At least once each year a Council must review the performance of its CEO.

Council must not appoint to its staff any person who has been a Councillor of the Council within 2 years after he or she ceased to hold office. Any appointment that contravenes this is void (section 102).

Senior Officers:

A senior officer is a member of Council staff who is entitled to a total remuneration in any 12 month period of at least $70,000.

The senior officer's contract is void unless it:

• specifies performance criteria for the purpose of review of the senior officer's performance;

• specifies the date on which it expires, which must be a date that is not more than 5 years, after the date it is signed; and

• includes any other matter that is required by the regulations.

On the expiry of a senior officer's contract, a new contract may be entered

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into with the senior officer. If a contract contains an option for renewal, the expiry date of the contract is the date on which the last option period ends.

Senior officers must be appointed on the basis of fair and open competition. A vacant senior officer position can only be filled after it has been externally advertised.

Principles applicable to Council sto.ffincluding the CEO:

The principles to be obseiVed in relation to Council staff are identified in the Act:

Recruitment to Council staff should be from individuals selected on the basis of relative ability, knowledge and skills in fair and open competition which assures that all receive equal opportunity~ Promotion and advancement should be from qualified individuals selected in fair and open competition on the basis of relative efficiency measured in relation to the position involved; All Council staff should receive fair and equitable treatment in all aspects of personnel management without regard to political affiliation, race, colour, religion, national origin, sex, marital status or physical disability; and Equal pay should be provided to work of equal value with appropriate consideration being given to the different requirements of various occupational employment categories.

Staff must be notified of any vacant permanent full-time Council staff position which it is intended to fill. Section 96 applies the principles of equal opportunity to staff recruitment and promotion by Councils. Schedule 6 deals with equal opportunity programs, which Councils with 40 or more members of staff must commence to develop and implement.

Conduct of Council Staff including the CEO:

All necessary steps should be taken to ensure that all Council staff maintain proper standards of integrity, conduct and concern for the public interest.

A member of Council staff must not accept from any person any fee or reward for anything done by virtue of his or her employmen~ or any thing to be done or performed by the Council which is a duty of employment unless the fee or reward is received from the Council or with the Council's written permission (section 99).

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OmERISSUES

Delegation and authorisation:

Under section 98 of the Act both the Council and the CEO may, by instrument of delegation, delegate to members of Council staff any power, duty of function of a Council under the Act or any other Act or the office of CEO respectively, except, inter alia, their power of delegation.

Further section 224 allows the Council to appoint any person other than a Councillor to be an authorised officer for the purposes of the administration and enforcement of any Act, regulations or local laws which relate to the functions and powers of the Council.

Indemnification:

It is to be noted that section 7 6 provides that a Council must indemnify and keep indemnified each member of Council staff (this includes the CEO) exercising any function or power on behalf of a Council against all actions or claims (whether arising during or after the term of office or employment) in respect of any act or thing done or omitted to be done in good faith in the exercised or purported exerciser of any function or power conferred on the Council or member of Council staff by or under this or any other Act. It follows that the Council will be ultimately responsible for the staffing decisions made by the CEO.

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A'ITACBMENT 4

Sample EXTRACTS from Itinerary for Councillor Keirl Senior

MAYORAL VISIT TO THE PIDLIPPINES- 1/1/97 to 21/1/97

Friday 3 January 1997

12.15 pm 1.20 pm

7.00pm

Depart Manila Flight PR133 Arrive Bacolod {City ofBacolod staff to pick up

Mayor & Mayoress from Bacolod airport) Check in at hotel Brief City Tour Dinner

Monday 6 January 1997

8.00 am 9.00am

12.00 noon 2.00pm

Flag Ceremony at Bacolod City Hall Ground Meeting in Conference Room with:

Mayor Leonardia Vice Mayor Drilon and City Councillors

Lunch hosted by Bacolod City Conference in Session Hall with City officuus/dep~entheads

Tuesday 7 January 1997

8.00 am

12.00 noon

Pass in Review Visayan Maritime Academy Tour of Visayan Maritime Academy Lunch hosted by Atty. John N. Orola

Thursday 9 January 1997

9.30 am

10.30 am

12.00 noon 1.30pm

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Courtesy Call & Meeting with Hon. Alfredo S. Lim, Mayor Courtesy Call & Meeting with: - Hon. Vice Mayor Lito L. Atienza, Jr. and City Council Lunch hosted by Vice Mayor & City Council City Tour Intramuros Fort Santiago CasaManila


6.30pm Dinner- Host: Hon. Alfredo S. Lim

Friday 10 January 1997

10.00am

12.00 noon 1.30pm 3.00pm 6.30pm

Meeting with Manila Base Businessmen, c/o Mr Ram on V.Luna,NGO Lunch, Host: NGO Visit to Pandanan Wreck, Department of Tourism Visit NHI Museum Dinner

Monday 13 January 1997

7.45 am 8.00 am 8.30 am 8.45 am 9.45am 10.45 am

12.00 noon 2.30pm 4.30pm 6.30pm

Welcome ceremonies at Cavite City Hall Flag Raising Ceremonies at Cavite City Hall Tree Planting at City Park Courtesy call on the City Mayor at Cavite City Hall Meeting with City Officials at Cavite City Hall Courtesy call on Capt. Jaime Bantolo, Commander, NBC at Sangley Point Lunch hosted by CNBC Visit Fort San Felipe, Shrine and Tour of Facilities Visit at Gen. Aguinaldo Shrine, Kawit Dinner at Josephine Restaurant, Kawit Overnight rest at Mount Sea Resort, Rosario

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Attachment 5

Agreement between Labor Unity faction and Labor Renewal Alliance faction dated 21 March 1997.

Batman Labor Unity ILRA 21/03/1997 Agreement

1. The Batman Labor Unity and Batman Labor Renewal Alliance support the agreement signed by LU and LRA on 20 December 1996 and subsequently endorsed by the executives ofLU and LRA. Under this agreement LU and LRA have agreed to cooperate on Federal, State and Local council matters.

2. In relation to Batman FEA elections

• LRA will support the LU candidate for Returning Officer. • LU and LRA will where possible preference to each others candidates in the

forthcoming FEA elections except where it is agreed that other ticketing is necessary to maximise the LRAILU vote.

• LRA and LU agree to cooperate fully in order to maximise the positions of both groups in the FEA elections.

3. In accordance with the central LUILRA agreement Batman LUILRA will support each others local candidates in State seats in the area.

4. Batman LU and LRA are committed to maintaining a Labor council in Darebin. LUILRA recognise that as a result of changed political alignments and circumstances the 1995 SLILU agreement which covered the Darebin Council no longer applies (it is further noted that some SL Councillors had sought to renege on the Darebin SLILU agreement prior to the election of the current Mayor)

5. In relation to future arrangements for the Darebin Mayoralty LU and LRA will support the following arrangement:

Mayoralty Mayoralty

1997-98 1998-99

LRA LU

Following elections in 1999, if the ALP is successful the LU and LRA will support each others candidates for Mayor in two years with the third year to be negotiated after consultation with other groups.

3. In relation to the next Darebin Council elections, LU and LRA will promote quality candidates and will support each others candidates for preselection on a formula to be agreed upon.

Signed on behalf ofLabor Unity Signed on behalf ofLabor Renewal Alliance

130

l}ntllL'II'l Laborp!lirvt1.H.;~ 21103!!997 ~.urnrnr

1. · 1'1lc lbrnllll 1..2.bor Uuity aDIJ B~tm:LO L;~bor R.:n~w:ll Alli:1•1c~ support the agr..:cllltoc Ji~ellriy-t.H 11nd J.RA oa ~0 Dcee&llcr 1$1!>' li.IIJ lllbJcq~tcntl) ~ 111Jvf>I:U 11,· tiJ.e uccu1i1·e~ or LU Md~RA.. Under this :~s,rccmen: LU anll LRA h:~'~ ~~:reel! to ~ovpcr:~tc on Fcdcr:tl, Sc.lt~ And Lx::ll ~ouocil ru:ll ten.

1.. l.ll ~latioa to D:slm.a..u FEA election~

• LR..O.. l•ill $UflflOl't the LU .:;andid:uc ror H.~rurning OITit:CI',

• LU IUld LR.A .,.ill ,..-bc're poi-tlble preference to csch otbcn c>ln<iidatc~ in th~ (or.hco::nin~: F'F.A clectioas except M" here it iJ J.gro!!!d chat or)\pr tick~ting i~ uccca,:u·y 10 m~•i"lilc the LRAIL'U ~·ulo;-. • LRA &: LU agrc.c to cooperate !1111,- ln nn.lcr to mHimisc !he pusi1i011S or huth i!roups fc tbc J:'EA

clc:~tiuns. ·

.3. Ju a.:~:ordancc \oilll the ceotr:U l.U/LRA ngrccnu:nc tl:111u:1n T.l!/LR.4. \l"ill suppor-t each others lot:U e2ndidatc.s in State ~sts in the arc:~.

-4. n .. bu1u1 LtJ li.Dd L~ arc tOnliUill<:d to 1llP.iat:~.inin2 A L;,hm· ('Onndl in llarc:hin. LU/LRA r~OI:J\i.SC thaC aJ a r:c~h of c:hanged polilical ali1nn1ents anJ cir·nu!l.;t~ntcJ th~ 1995 SLJLU awtcment 'l'l·b.ich covered the Ducbin Cvuncil nP lon~tcr llJIJIIi~s (ll h (ut1h~r ootc\J tha.t sacne SL Ccuucillur.a. ha4 J,nu~ht. 10 ruc~c oa the PRrchin STJl..lJ :~.~:n•('nceut prior to t~ clectitln or the curnnt Mayor)

!o. ln relation to future :arnn.gemcnt~for the P~tvbin ,\J;t~r)I':Jlty LU :~nrl l.HA will Sllpport the followia~~: arn.J:~gczuent:

M:ayoraltr Jrlayorallr

LlU LU

Follu'l'l ia~ elcctioas la 1999, lt tile ALP il succt.Uflll I be Lll :~nd LRA will siipJlOrt eacb others c:au.dldates Cor Ma)'Or la two yetn witb thr lhirrt yrlr to h~ n"J!Ofi~tcd :!fiPJ' ~on>ulla!iou w1th otbe1· grovps..

·G. L1 nlalion t.o .t)le uc1t Darcbin Cnundl rlrrtiun~. ·l.t; :~nd LR-4: ;,~ll promote qu:t.lity c:andidatcs a ad will ""PPOrt uch olhc:n candidatc:s·ror prc~dcction ou :1 furmul~ !o l>c agreed upon.

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