Posted on December 21, 2015 by Stuart Simington

Government Moves To Clip Council Wings During Merger Proposal Periods

The Chief Executive of the Office of Local Government has issued a circular regarding new guidelines (Guidelines) issued to councils under s23A of the Local Government Act 1993 (LG Act) on 18 December 2015.  The Guidelines seek to significantly curtail what councils can do during consideration of council merger proposals (of which 35 were also announced on 18 December). A likely concern of councils (opposed to the current merger proposals) are the prominent warnings to councils and council officials that:

• they should not act or use council resources for personal or political purposes in relation to the merger proposals,
• failure to comply with the restrictions in the Guidelines may result in the Minister issuing a performance improvement order to the council under s438A,
• council officials may be surcharged for the amount of any deficiency or loss incurred as a result of negligence or misconduct.

The legal basis for the Guidelines is s23A of the LG Act which allows the Chief Executive to adopt guidelines relating to the exercise by a council of any of its functions and to require those to be taken into consideration before the exercising of any of its functions.

In this case, the new Guidelines relate to:

• mergers – essentially council amalgamations or boundary alterations
• merger proposal periods – the period starting from the date a merger proposal is made and ending after the Minister declines to recommend the proposal or the date specified in the proclamation recommending the proposal be implemented.

The Guidelines are divided into the following sections:

• Council decision making during merger proposal periods – General Principles
• Integrated Planning and Reporting
• Financial Management
• Workforce Management
• Regulatory Functions
• Merger Related Information Campaigns
• Enforcement of these Guidelines

A summary of some of the key aspects under the above headings follows.

General Principles

The Guidelines do not seek to prevent councils from the legitimate exercise of legal rights of review or appeal, but do seek to prevent councils and council officials from:

• otherwise preventing or disrupting the consideration of the merger proposal
• making decisions or using council resources for personal or political purposes
• seeking to damage the operational effectiveness of a new councils such as by imposing needless avoidable costs on that council.

Integrated planning

Should councils prepare operational plans during the merger proposal period, these are required to be prepared as a sub-plan of the adopted Delivery Program and not to depart from it.

Financial Management

Councils should only expend money in accordance with the detailed budget adopted for the Operational Plan and there should be clear and compelling grounds for expenditure outside of that. Where expenditure outside of budget  is $250,000 or 1% of the rates revenue of the previous year (or more), any such variation must be advertised and public comments invited.

The Guidelines also impose restrictions on entering into new contracts or undertakings involving such expenditures or receipts unless they are entered into  as a result of decisions or procurement processes commenced prior to the merger proposal period or reasonably necessary for ongoing service delivery commitments or to implement the Delivery Program or Operational Plan.

Workforce Management

Councils are advised not to appoint or reappoint general managers during the merger proposal period except with temporary or acting appointments. Council should also avoid such appointments for senior staff. There should be no organisation restructures nor involuntary redundancies.

The Guidelines notify that changes to terms and conditions for council staff will not be binding on a new council unless:

• approved by the Minister,
• authorised by existing industrial agreements, or employment policies or
• made in accordance with instruments made or approved by the Industrial Relations Commission or Fair Work Australia.

Regulatory Functions

Councils are reminded not to exercise regulatory functions for the purpose of campaigning for or against a merger proposal nor to make decisions that would not withstand legal challenge on the basis that the new council would need to defend any such challenge.

Merger-Related Information Campaigns

Any campaigns by councils regarding merger proposals are required to:

• be for the purpose of informing the local community
• be proportionate to that purpose
• not involve disproportionate or excessive expenditure
• be objective, accurate and honest
• not endorse, support or promote councillors, policitcal parties, community groups or candidates for election
• be approved (including their budget) at an open council meeting

Enforcement

As their name would imply, s23A Guidelines are not directly enforceable as laws.

However, as indicated in the introduction, the Chief Executive seeks to make this particular Guideline menacing by threatening that failure to comply may result in the issuing of performance improvement orders (PIPs) or possibly the surcharging of individuals.

We have previously discussed PiPs here and here.  In summary, a PiP can be issued if the Minister reasonably considers that action must be taken to improve the performance of the council having had regard to the criteria set out in clause 413D of the Local Government (General) Regulation 2005 as follows:

(a)  whether the council concerned has failed to comply with its legislative responsibilities, standards or guidelines,

(b)  whether there are significant risks facing the council that are not being addressed,

(c)  whether previous intervention attempts have failed,

(d)  whether council business is being disrupted and the council failing to exercise its functions,

(e)  whether the appointment of a temporary adviser is necessary, in the opinion of the Minister, to restore the proper or effective functioning of the council,

(f)  whether there is a pattern of poor or inappropriate behaviour, either by one or more councillors or members of staff of the council, that has not been rectified,

(g)  any other matter that, in the opinion of the Minister, is relevant to the issuing of the order.

Although the criteria do not specifically mandate that failure to comply with a s23A guideline is grounds for the issuing of a PiP, it is apparent that an unjustified departure from the Guideline could well be a matter that the Minister could consider relevant under paragraphs (b) or (g) albeit weighed up in the consideration of all the matters mentioned.

In terms of surcharging, s435(2) of the LG Act allows the Chief Executive to surcharge on a councillor, the general manager or any other member of staff of the council the amount of:

(a)  any deficiency or loss incurred by the council as a consequence of the negligence or misconduct of the councillor, general manager or member of staff

It seems far from clear that conduct of a council official in breach of the Guidelines could be said thereby to be misconduct or necessarily negligent, at least if the Guidelines have been given proper consideration. So the scope for this particular sanction to be imposed for breach of the Guidelines may be much more limited.