New report released - An inherent conflict of interest: councils as developer and regulator

There is inherent potential for conflicts of interest when NSW local councils undertake their own developments, according to a new report by the NSW Ombudsman.

The report An inherent conflict of interest: councils as developer and regulator, tabled in Parliament today by Acting Ombudsman Paul Miller, has found this potential exists because there are no clear guidelines or best-practice approaches for instances when a local council is both the developer as well as being the regulator of that development.

The report also highlights an instance when such a conflict of interest led to unlawful action.

A 2019 investigation into Broken Hill City Council (Council) by the NSW Ombudsman, included as an appendix to the main report, found that the Council failed to comply with the Environmental Planning and Assessment Act 1979 on one of its own developments. The investigation ascertained that the Council allowed its unfinished Civic Centre to be used for large public functions, despite not having the necessary certification that it was safe to do so.

“The Ombudsman found that Council acted contrary to law by allowing parts of the centre to be occupied and the events to be held,” said Mr Miller. “Council also took no compliance or enforcement action against itself for that breach.

“The Council’s breach and subsequent non-action stand in contrast to its published Compliance and Enforcement Policy and its commitment to a ‘zero tolerance approach to unlawful and unauthorised development and non-compliance with development consent conditions’.

“Broken Hill City Council had a clear financial and reputational incentive to allow the events to proceed at the Civic Centre, even though it was not complete and parts of it had not been certified as safe for occupation.”

This breach, which only came to light because of whistleblower reports, highlights the need for action on this systemic issue, which affects most if not all NSW councils.

A subsequent 2020 survey of local Councils by the NSW Ombudsman shows that the potential for councils to occupy dual roles is widespread and that there are no consistent measures for dealing with such conflicts of interest.

“I recommend that a local council working group, led by the Department of Planning, Industry and Environment, be convened to identify and implement measures to avoid or, if unavoidable, manage these kinds of conflicts of interests,” said Mr Miller.

The report suggests a number of options for instances when conflicts arise from councils having a regulatory/enforcement role in relation to development applications in which they have an interest. Options that could be considered by the proposed working group include conferring all enforcement powers on the Department of Planning, Industry and Environment (DPIE), or a new panel or commission; requiring clearer role separation withing councils; and, mandatory notification of breaches and enforcement action taken (to DPIE and the public)

“I recognise that there may be no easy and ‘one size fits all’ solution to the problem. Developments of different natures and size may raise different risks,” said Mr Miller.