New DPE secretary Kiersten Fishburn has been forced to answer to a scathing assessment of the Office of Local Government in her first days in the job.

Ms Fishburn, whose appointment was confirmed to Government News two weeks ago, has conceded that much remains to be done to improve the local government regulator, which is a business unit within her department.

The comments are contained in a letter responding to NSW auditor general Margaret Crawford after a report found the OLG can’t demonstrate it is doing its job.

“The OLG cannot demonstrate that it is effectively regulating the local government sector,” Ms Crawford concludes in the report handed down on Tuesday.

Findings contained in the report include that the OLG doesn’t effectively monitor councils, has failed to define its role, doesn’t regularly review the results of its regulatory measures, doesn’t have fit-for-purpose information management systems and has out-of-date regulatory frameworks.

It’s also failing to engage with the sector and communicate its role and functions.

Ms Fishburn said most of the points raised in the audit represented “long standing legacy issues” that were being addressed by the OLG.

However, she added “we will carefully review the recommendations from the report and implement further improvements over the next 12 months.”

The improvements will be guided by sector-wide reforms including the IPART rate peg review, a review of the councillor conduct framework and reviews of councils’ performance benchmarking and financial modelling, she said.

Responsibility for strengthening sector

As the state regulator of the local government, the OLG is meant to strengthen the sustainability, performance, integrity, transparency and accountability of the sector.

It’s responsible for promoting voluntary compliance, building local government capacity, developing policy, administering grants and programs, supporting local government election processes and issuing certain approvals.

OLG also has the power to issue guidelines and investigate councils and councillors, and supports the minister’s intervention powers.

However, the report found OLG is failing to properly monitor local government performance and compliance, and doesn’t routinely review the results of its regulatory actions to make sure they’re working.

Inadequate performance measurement and reporting on its regulatory activities is a significant transparency and accountability issue.

NSW Auditor General Margaret Crawford

“Inadequate performance measurement and reporting on its regulatory activities is a significant transparency and accountability issue, and the OLG cannot demonstrate that it is effectively regulating the local government sector,” Ms Crawford says.

“Ineffective sector monitoring is a particular issue in the context of compliance, financial management and governance risks that have been identified in inquiries and reviews by other government agencies including integrity bodies and reported by the sector.”

The audit found that while the OLG collects information about local government performance from varioud sources, “it does not have fit-for-purpose information management systems to support effective sector monitoring.”

Ms Crawford also said repeated recommendations and initiatives to improve the functioning of OLG haven’t been implemented or are lagging.

“The OLG has identified projects that could improve its sector monitoring, but relevant progress has been limited,” the report says.

The report recommends that the OLG:

• publish a tool to help councils to self-assess risks and report on their performance and compliance
• ensure its council engagement strategy is consistent with its regulatory approach
• report each year on its regulatory activities and performance
• publish a calendar of its key sector support and monitoring activities

The audit shows the OLG received 1,543 complaints about councils in 2020-21 and has made nine improvement orders since July 2019.

The minister’s statutory intervention powers have been used in relation to six councils in the last four years, to address issues such as financial and asset management, governance and councillor misconduct. This has included 6 performance improvement orders and three suspension orders.

There have also been three public inquiries, each of which led to the dismissal of the relevant council and the appointment of an administrator.