The Hepburn Shire Council has acknowledged an apparently unauthorised release of the Local Government Inspectorate (LGI) draft report on the Hepburn Hub at The Rex project.

The draft report concerns an investigation of the management of the project which proposed to convert an art deco shopping arcade (Rex Theatre) on the main street of Daylesford into a community facility, including library and council offices.

The council also acknowledges that due to the report’s release, the community will be feeling a range of emotions; frustration, anger, sadness, discontent and discomfort.

The council has been calling for the finalisation and release of the LGI report for many years, to bring closure to the situation.    

In a media release issued this week the council has stated that: “The way the confidential draft report has been made public is concerning and Council has formally written to the LGI to request a thorough review of the situation.”

The council’s media release also states that:

“As far as Council’s awareness of the matters raised in the report, in 2021 a number of Councillors and Officers were provided with an earlier draft for comment.

“However, they were under a legal obligation not to reference receipt of the report or disclose its contents. This 2022 version of the report, though, is unfamiliar to our organisation and Councillors and Council cannot comment on its origins or accuracy.

“The report obviously highlights significant areas for improvement, and a media release issued by the LGI in September 2024 noted that they were ‘satisfied that the Council has taken remedial action to put in place measures to avoid future complaints of a similar nature, including the creation of a new governance and policy framework’.”

Hepburn shire mayor Cr Don Henderson, said: “The current leadership (post-2018) at Council has implemented important improvements to governance, service delivery, community engagement, and transparency.

“These vital improvements have occurred while we have responded to the pandemic and the impact of three major storm events (costing Council $3.5 million), and delivered key projects including Djuwang Baring, The Mechanics Trentham, Future Hepburn and our Financial Vision”.

Chief Executive Officer, Bradley Thomas said he was proud of the organisation’s willingness and ability to ensure that the failings identified in the report do not occur again.

“Our organisation and community deserved better, so over the last six years we have put in place countless improvements to systems, processes and governance; the implementation of Project Control Groups, creation of a Major Projects Unit and an increased oversight by the Audit and Risk Committee and Councillors.

“This has resulted in improved project delivery, governance and financial oversight,” Mr Thomas said.

The financial loss associated with the Hepburn Hub at The Rex project was $5.65 million. This included the purchase of The Rex in 2016 for $6.345 million, additional expenditure of $3.04 million, and proceeds from the sale amounting to $3.74 million.

“The $5.65 million is significant, however, it is important to be clear to the community that the current rate cap variation and savings associated with the implementation of our Financial Vision would still be required even without it,” mayor Cr Henderson said.

“The Financial Vision notes an annual shortfall of $4 million per year across the 10 years so, had the loss associated with The Rex project not been incurred the shortfall, would still have amounted to $3.5 million annually.

The council is working with the relevant stakeholders to bring closure to and recover from this incident and will continue to advocate for the community and their interests now and into the future.

This story based on a Hepburn shire Council media release. Image: File

Answering a query from The Local, after a widely circulated report from Council Watch Victoria about alleged issues with the Local Government Inspectorate investigation into Hepburn Shire Council and The Rex, the Inspectorate says it does not intend to take any further action.

Instead, it resent a media release from last September saying the LGI received a complaint in 2019 relating to the Hepburn Shire Council’s involvement with the Rex Theatre redevelopment.

The release said it had since undertaken a rigorous investigation, found insufficient evidence to uphold the complaint and would not be taking any action or publishing any report.

The Council Watch Victoria report says the LGI lacked the legal authority to release any findings and reports from its investigations.

By Donna Kelly

So the Local Government Inspectorate will not release any report into its five-year investigation of Hepburn Shire Council and The Rex Theatre development.

That’s pretty amazing. Imagine working on something for five years, using taxpayer money, and then deciding “nothing to see here”.

Or imagine working on something for five years, in a private company, and then telling shareholders “nothing to see here”. Wouldn’t pass the pub test. Or the shareholder test.

The Inspectorate issued a media release last Monday, September 2, which said there was insufficient evidence for any disciplinary breaches or criminal offences. It also said the Chief Municipal Officer was satisfied that the council had taken remedial action to avoid future complaints of a similar nature.

So, nothing to see here, but let’s not let it happen again. What the actual?

The release went on to say the Local Government Inspectorate is “the dedicated integrity agency for local government in Victoria”.

Good to know. Hepburn Shire Mayor Cr Brian Hood says it’s disappointing and the failure to issue a report into The Rex project denies transparency and accountability, and lets down the community, councillors and council officers.

The community is not that rapt either. To put it lightly. Social media went into overdrive with ratepayers left wondering where their rates had gone and who was accountable.

“So where is the explanation for the missing money?”

“Outrageous!”

“It’s astounding that after all this, millions wasted, project unfinished, massive debt accrued putting council at danger of existence, residents saddled with debt through increased rates…a whole host of negative and destructive outcomes to the shire and to the public…yet no finding of wrong doing, none worth publishing a report, none worth taking action, no criminal or unlawful activity found, not even incompetence, ‘misguided’ action with detrimental effects, incorrectly followed processes…nothing.

“Just a mysterious massive blunder that cannot be explained or has no accountability, no responsible decision makers who may have cause or contributed to the problem.”

“Unacceptable.”

“One wonders how much it’s cost for the LGI and the CMI to come to this conclusion! What a total f”!k up!”

“It’s like we need a Hepburn Shire ratepayers’ private investigation into where the $$$ went, we personally worked out we are all owed $500 each at the time of the blunder.”

“Unbelievable.”

“Speechless. All these years and we’re left with this. It’s as if we live in a totalitarian state. No one accountable. Shocking.”

“What a strange and flawed process where no one is ever held accountable! What a debacle and utter disgrace.”

And yet on we go. Millions lost, no-one accountable, no explanation and anyone who rocks the boat and releases the report – well, you wouldn’t want to be them.

The integrity agency has made that clear. Ask your local councillor about the report and you will probably hear: “What report?” No longer exists. Nothing to see here. Just sayin’…

The Local Government Inspectorate will not take any further action into the  investigation of Hepburn Shire Council and The Rex Theatre development –  and its report will never be released.  

The Inspectorate issued a media release last week which said it found there was  insufficient evidence to prove to the requisite standard of proof of the commission of  any disciplinary breaches or criminal offences contrary to the 1989 Act.  

“Further, the Chief Municipal Officer is satisfied that the council has taken  remedial action to put in place measures to avoid future complaints of a similar  nature, including the creation of a new governance and policy framework.”  

The release said in 2019, the LGI received a complaint that made allegations  relating to the council’s involvement with The Rex Theatre redevelopment.  

“Since receipt of the complaint, the LGI has undertaken a rigorous investigation  of the allegations. Throughout, Hepburn Shire Council and its councillors have co operated. The LGI’s investigation has now been finalised.”  

The release says the Local Government Inspectorate is the dedicated integrity  agency for local government in Victoria.  

“The Chief Municipal Inspector leads the LGI and has functions and powers,  including those set out in the Local Government Act 2020, to enable the LGI to  examine, investigate and prosecute any matter relating to a council’s operations and  any potential breaches of the 2020 Act and its predecessor the Local Government Act  1989 (1989 Act).”

Hepburn Shire Council response  

Mayor Cr Brian Hood said that it was extremely disappointing that it had taken so long for the Inspectorate to arrive at its conclusion and no report would be issued.  

“We are frustrated and very disappointed that a comprehensive, detailed  report won’t be released. The failure to issue a report into The Rex project denies  transparency and accountability and lets down the community, councillors and  council officers,” he said.  

Cr Hood said ensuring the appropriate checks and balances were in place meant  failures of the past would not be repeated and emphasised the importance of “having  a culture where officers of all levels feel able to raise concerns about governance”.  

“The same applies to councillors. The LGI media release acknowledges the current  officer and councillor group had improved governance oversight.”  

Cr Hood said he had other concerns including that the LGI undertook a  “rigorous investigation” yet has provided no reason why it will not issue any report.  

“The failure to report denies an explanation the community is owed. It prevents  accountability and transparency.”  

He added that the LGI concluded there was “insufficient evidence” to warrant  any disciplinary or legal action.  

“For any organisation to self-report to a regulatory authority is a significant  step. Council management of the day were obviously of the view that some matters  warranted investigation by an independent regulator.  

“It would seem there is a significant disparity between the council management  who self-reported to IBAC and the Inspectorate’s unexplained conclusion.”  

Cr Hood said The Rex saga highlighted what can go badly wrong in any  organisation if the culture isn’t right or if there is a light-handed approach to  governance.  

“The purchase of The Rex, contrary to community consultation, led to a  substantial financial loss – a waste of ratepayers’ money – and tarnished the council’s  reputation.  

“And let’s not forget while all the attention was on The Rex, the Daylesford Town  Hall was shamefully neglected and is only now getting its much-need new roof and  replacement electrical systems.”  

History

Hepburn Shire Council bought the Vincent Street, Daylesford former theatre in  2016 for $6 million – a move prompted after its toilets were closed to the public.  The council then spent $3 million on the building which was to house a cinema,  staff offices, a library and public toilets, with another $6 million needed to complete  the project.

Interim CEO Bruce Lucas paused the Hepburn Hub at The Rex project in June  2018, becoming concerned about governance failures, also reporting the issue to the  Audit and Risk Committee. Incoming CEO Evan King reported concerns to the  Independent Broad-based Anti-corruption Commission (IBAC), and ultimately the  Inspectorate commenced an investigation.  

In December 2021, council officers recommended that the council continue with  the project. However, four councillors voted against the project – Cr Lesley Hewitt,  Cr Don Henderson, Cr Juliet Simpson and Cr Brian Hood. In favour of continuing  with the hub were Cr Jen Bray, Cr Tessa Halliday and Mayor Cr Tim Drylie.  

Present day  The Rex was bought from the council in December 2022 by entrepreneurs and  businesspeople Eddy and Malinka Comelli, and David and Yuge Bromley, for $3.75  million.

Words & image: Donna Kelly  

Breaking news on The Rex, Daylesford

The Local Government Inspectorate has issued a media release about the Hepburn Shire Council and The Rex Theatre Development.

“In 2019, the LGI received a complaint that made allegations relating to the Hepburn Shire Council’s involvement with the Rex Theatre redevelopment,” the release says.

“Since receipt of the complaint, the LGI has undertaken a rigorous investigation of the allegations. Throughout, Hepburn Shire Council and its councillors have co‑operated.

“The LGI’s investigation has now been finalised and the CMI has concluded that there is insufficient evidence to prove to the requisite standard of proof the commission of any disciplinary breaches or criminal offences contrary to the 1989 Act. 

“Further, the CMI is satisfied that the council has taken remedial action to put in place measures to avoid future complaints of a similar nature, including the creation of a new governance and policy framework.

“Accordingly, the LGI will not be taking any further action in respect of the investigation. Nor will the LGI be publishing any report.”

The release says the Local Government Inspectorate is the dedicated integrity agency for local government in Victoria.

“The Chief Municipal Inspector leads the LGI and has functions and powers, including those set out in the Local Government Act 2020, to enable the LGI to examine, investigate and prosecute any matter relating to a Council’s operations and any potential breaches of the 2020 Act and its predecessor the Local Government Act 1989 (1989 Act).”

Hepburn Shire Council response

Mayor Cr Brian Hood said that it was extremely disappointing that it had taken so long for the Inspectorate to arrive at this decision and that no report will be issued.

“We are frustrated that a comprehensive, detailed report won’t be released. The failure to issue a report into The Rex project denies transparency and accountability and lets down the community, councillors and council officers,” said Cr Hood.

Hepburn Shire Council CEO Bradley Thomas said that it was important to note that the Chief Municipal Inspector has concluded that “council has taken remedial action to put in place measures to avoid future complaints of a similar nature, including the creation of a new governance and policy framework”.

“We have significantly improved governance, policies, and the culture in the organisation, implementing systemic change and improvements to ensure that the failures of The Rex project are never repeated again. This should give councillors, and most importantly the community, confidence as we move forward,” said Mr. Thomas.

Some of the organisational changes put in place since the commencement of the Inspectorate investigation include:

• Creation of a Major Projects Team (that does not report to the CEO)
• Development of a Project Management Framework
• Updates on high risk/complex projects being provided regularly to the Audit and Risk Committee (the Audit and Risk Committee comprises four independent members)
• Adoption of a contemporary Risk Management Framework
• Established a CEO Employment and Remuneration Committee, with external, independent members, along with Councillors
• Adoption of a new Procurement Policy
• Development of a Disposal and Acquisition of Land Property Policy that ensures all purchases and sales comply with legislation, and that a current and independent valuation is obtained before Council enters into such arrangements
• Significant investment in the Governance and Risk Unit to ensure it has appropriately skilled and experienced staff to provide advice and monitor compliance with legislation and governance requirements. 

Interim Chief Executive Officer Bruce Lucas paused the Hepburn Hub at The Rex project in June 2018, when becoming concerned about governance failures, also reporting the issue to the Audit and Risk Committee. Incoming Chief Executive Officer, Evan King reported concerns to IBAC, and ultimately the Inspectorate commenced an investigation. 

Councillors, officers, and the Audit and Risk Committee have been fully supportive of the reporting, working through the investigation and have repeatedly called for the finalisation of the investigation to occur. The LGI have noted that throughout, Hepburn Shire Council and its councillors have co-operated in the investigation.

Cr Brian Hood said: “Ensuring we have the appropriate checks and balances in place means failures of the past will not be repeated, and having a culture where officers of all levels feel able to raise concerns about governance is vital.

“Council has been unable to find evidence that an independent, external valuation was completed prior to the purchase of The Rex building, something that is now a requirement due to the adoption of the Disposal and Acquisition of Land Property Policy.”

Cr Hood said that although extremely disappointing “that we won’t have a report, we can now endeavour to draw a line in the sand and move forward as an organisation and community”.

“I’m pleased this announcement was made before the end of this council term. We have a busy couple of weeks ahead of us with the consideration of the next stages of the Future Hepburn project including township structure plans, the financial vision and the last council meeting for the term.

“Council is progressing a project to assess the feasibility of maximising the community use of the Daylesford Town Hall site, with an option to consolidate and upgrade the building so it could become more of a community hub, and possibly incorporate the Daylesford Library. This has included the creation of a community-based Project Advisory Group, and also the appointment of a lead architect for the Daylesford Community Facilities Project.

“It is imperative that the Inspectorate has the appropriate powers to investigate failings in local government and that it has adequate resourcing into the future, preventing delays such as with this investigation, and ensuring that there is transparency and accountability in the use of ratepayers funds.”

Words: Donna Kelly | Images: File

In October last year The Local received a leaked document, via a USB drive, regarding the report by the Local Government Inspectorate into Hepburn Shire Council and dealings with The Rex. And a few other things.

The document arrived a week after The Local had emailed the Inspectorate to ask why the report had not been released and received an email back saying the Inspectorate was unable to share any information at that time.

The Local also contacted Hepburn Shire Council at the time with CEO Bradley Thomas saying the council had been in regular contact with the Local Government Inspectorate regarding the release of the report and “we have been calling for the release for some time – we can’t speculate on the reasons for the delay, but encourage you to contact the LGI directly”.

After a column by Donna Kelly on the receipt of the leaked document, The Local was asked to deliver the drive and any associated paperwork to the Inspectorate.

Last Wednesday, May 1, after receiving a media release … stating the state government has introduced new legislation to improve council governance and integrity standards, The Local wrote again to the Local Government Inspectorate asking when the report would be released.

It also wrote the same day to the media advisor of Local Government Department Minister Melissa Horne, who sent out the release, asking how the new legislation would help the people of Hepburn Shire uncover what had happened with their ratepayer dollars.

No reply was received from either department before press time.

The Local Government Inspectorate’s charter is “Encouraging higher standards of integrity, accountability and transparency in local government”.

And the state government continues to release media releases about legislation which will “elevate governance and integrity standards in Victoria’s 79 councils” and that “since the last council elections in 2020, 56 councillors have resigned and 11 councils have had municipal monitors appointed as a result of governance issues”.

That is all fine and dandy for those councils, but every Hepburn Shire ratepayer has the right to know what happened to their rates – and how long it will impact the delivery of services to the region. Until then, where is the integrity? And most of all, where did our rates go?

Words: Donna Kelly

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