Governance, probity and internal controls

Governance, probity and internal controls are important to ensure infrastructure contributions are collected appropriately, accounted for, well managed and spent as intended. They reduce the risk of corruption and other undesirable outcomes.

This module outlines the governance, probity and internal controls councils should implement to safeguard the infrastructure contributions system.

Legislative requirements

The Local Government Act 1993 specifics the general audit and risk requirements councils must comply with.

There are also specific requirements under the EP&A Act councils must comply with concerning the financial management of contributions funds, security and reporting. These requirements are discussed in detail in their respective modules.

Policy positions

Probity and governance are critical in the infrastructure contributions system

Probity is acting with and demonstrating ethical behaviour in a particular process. Councils must demonstrate high standards of probity and good governance in all their contributions related processes, to ensure contribution funds are being appropriately managed and that stakeholders can have confidence in the contributions system.

Decisions must be made with integrity, honesty and fairness. Councils should be impartial in their dealings with the community, developers and applicants, be accountable and transparent, appropriately deal with conflicts of interest and ensure that they are getting value for money when making decisions about how to collect and spend contributions.

Councils can demonstrate their commitment to probity and good governance by:

having publicly available policies on probity and good governance that specifically discuss how contributions will be treated
ensuring all staff and councillors are aware of their responsibilities under their code of conduct and the legislative requirements that are specific to contributions
maintaining accurate records
documenting all decisions
making information available to the public for scrutiny.

Councils with large contribution budgets should establish an infrastructure contributions governance committee

Councils should establish an infrastructure contributions governance committee to oversee all infrastructure contributions and planning agreements. This is particularly important for councils with large contribution balances.

The committee should:

meet regularly to track collections and expenditures and report on works completed
have oversight of planning agreements
track planning agreements and ensure that works are being undertaken
make decisions on the need for a review of a contributions plan
make decisions on the timing of infrastructure delivery
oversee the preparation of annual reports and other reporting requirements.

Committees should comprise senior council officers from each relevant section of the council and may be chaired by the council's general manager or other appropriate person. All decisions by the committee should be formally documented and made publicly available.

Council fraud and corruption control frameworks should include contributions

Councils should specifically include infrastructure contributions considerations in their Fraud and Corruption Control Frameworks. The framework should identify and manage the specific risk of fraud or corruption present within the infrastructure contributions system and include prevention and monitoring strategies. This is particularly important in relation to planning agreements, where the risk of fraud and corruption is higher and where decisions can have significant financial and reputational implications for council.

The Independent Commission Against Corruption (ICAC) is responsible for investigating corruption in the NSW public sector including in councils. The ICAC website provides important information about how councils can prevent, identify and manage corruption risks. The Audit Office of NSW provides important information about how councils can prevent and manage fraud.

Councils should be particularly mindful of probity and conflicts of interest when negotiating planning agreements

The flexibility and negotiated nature of planning agreements make them a useful tool in delivering infrastructure. However, planning agreements can also create a risk of misuse and corruption if appropriate governance, probity and internal controls are not developed and followed. Additionally, having and following strong governance and probity frameworks can help improve public perceptions of planning agreements and their role in the planning process.

Councils should address governance and probity for planning agreements when developing infrastructure contributions policies and frameworks. This should also be specifically addressed in detail in a council’s planning agreements policy.

Councils should implement strong internal controls to ensure probity

Internal controls can help ensure councils adhere to and can demonstrate probity in relation to their decisions, and protect critical contributions related data and information.

Clear and accurate records of all decisions

All decisions relating to contributions and planning agreements should be thoroughly documented. Poor record-keeping is a corruption risk.

Accurate and complete records allow decision makers to justify why decisions were made. For example, clear records can indicate why planning agreements were made, why money was spent, how purchases achieved value for money, and that the decisions were free from bias.

Councils are required to make their contributions plans and planning agreements publicly available on their websites and the NSW Planning Portal. They should also ensure that any other public information relating to a contributions plan or planning agreement is also easily accessible and in plain language so members of the public can review and understand this information.

Security around contributions data

Councils should secure their contributions data. Councils that maintain their contributions data in spreadsheets should be especially mindful of data security, as spreadsheets have limited data audit trails and the data can be easily changed.

Councils should adopt internal controls to manage risks associated with losing or accidentally overriding critical data. For example, spreadsheets should be password protected or stored in secure folders rather than in folders that can be accessed by all staff.

Regular audit of contributions functions

Internal audit is a key mechanism to manage risk and ensure probity. Councils should run regular internal audits of their contributions system to ensure contributions are being managed and spent appropriately. Office of Local Government’s Internal Audit Guidelines provides more information on a council’s audit requirements.

Best practice guidance

Infrastructure contributions require a whole of council approach to good governance

Contributions are a significant component of a council’s financial management function and they impact all sections of the council. Councils should consider all relevant plans, strategies and policies to ensure that contributions are integrated within council’s overall management framework.

As contributions and planning agreements are one of several mechanisms for funding public infrastructure, the infrastructure contributions system should also integrate with financial management plans prepared by the council for budgeting and expenditure purposes.

Councils should consider the implications arising from any contributions plan or planning agreement in the context of the council's overall service delivery function. They impact and influence the work program and responsibilities of a broad cross-section of council operations.

Strategic planning, development assessment and environmental services may be involved in forecasting and facilitating development, preparing and reviewing contribution plans, negotiating and administering planning agreements and issuing and enforcing development consents.
Engineering, community and recreation services may be involved in planning, designing, constructing, maintaining and managing local infrastructure.
Administrative and corporate services may be involved in managing the administrative, legal and financial accounting processes.

The preparation and ongoing administration of the infrastructure contributions system involves all relevant departments of the council.

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