20 December 2012 – Former Victorian Building Commissioner Tony Arnel, a former long-term chair of both the Green Building Council of Australia and the World GBC, claims the Victorian Ombudsman’s findings last week of “largesse and extravagant sponsorship” during his tenure at the commission ignore the previous government’s strong endorsement to support green building movement in Australia and globally.

In an interview with The Fifth Estate this week, Mr Arnel said roles in the GBCA and the World GBC as well as his other roles on the Building Codes Board required “significant travel and all travel expenditure was endorsed by the Departmental Secretary. Some of the travel also had the endorsement of the Minister of the day”.

See below for:

  • Highlights of the Ombudsman’s report and link to the full report.
  • A statement from Victorian Planning Minister Matthew Guy
  • Tony Arnel’s media statement

“This has been very frustrating for me,” Mr Arnel said. “Melbourne has the one of the highest concentration of green buildings in the world.”

In order to achieve this there needed to be a high level of collaboration and participation, he said. “This is what is being criticised in terms of marketing and hospitality.”

Sponsorship for the GBCA and the development of rating tools had come from Victorian Agencies such as VicUrban, Sustainability Victoria, the NSW Department of Planning and the Federal Government.

“They absolutely all sponsored the rating tool and VicUrban sponsored Green Star Communities.

“In 2002 premier Steve Bracks said Victoria wanted to support the establishment of the GBCA and I was asked to be on the original board and I sat on it for 10 years and chaired it for five years.

“When I was chair of the GBCA of Australia and the opportunity arose to be involved in the world GBC in mid 2000 the government of the day and the minister were very keen for Victoria to take a leadership role.”

Perhaps the response on expenditure needed to be seen in the light of strong support for the green building movement by the previous Labor Government and a retreat from this position by the current government, Mr Arnel suggested.

The Green Building Council of Australia said in response to the Ombudsman’s report that the “strength and growth of the GBCA and the development of an internationally-recognised sustainable built environment in Australia is due to the ongoing support the GBCA receives from all three tiers of government, as well as from the property and construction industry”.

GBCA chief executive Romilly Madew said: “Support has included sponsorship of Green Star rating tool development and grant funding, as well as research assistance, volunteering of staff, and formulating professional development courses for the industry.

“Funding received from the Victorian Building Commission has been directed towards developing and strengthening the Green Star rating system, supporting green skills education and collaboration, and helping to build and assess more sustainable buildings and communities around Australia.

“These objectives have been in line with those of the Victorian Government, encouraging more healthy, productive and efficient buildings and communities.”

Ombudsman George Brouwer said “significant public funds were spent by senior executives of the commission on questionable entertainment, hospitality and sponsoring industry bodies’ events and awards”.

Examples of this expenditure included more than $200,000 on meals and entertainment over a three-year period; more than $100,000 spent in 18 months on entertaining at sporting events such the AFL and Australian Open Tennis; a policy that allowed staff to spend up to $500 on meals and hospitality before management approval was required; more than $300,000 incurred on travel expenses related to the Green Building Council of Australia and the World Green Building Council and nearly $950,000 expended in less than four years on sponsorship of events and awards run by bodies such as the Master Builders Association of Victoria and Housing Industry Association of Victoria.

The Ombudsman said, “I do not see any justification for the Commission to spend significant public funds on meals and entertainment for external stakeholders or its staff. In my view there is an inherent conflict in the commission providing this entertainment when its core function is the regulation of the people it is entertaining.”

Victorian Planning Minister Matthew Guy said the behaviour was “out of control” and “completely inappropriate”, particularly as these funds were “sourced from Victorians who are trying to purchase their home or operate their business”.

The Ombudsman’s report “highlighted how standards in the management and governance of the Building Commission had eroded under Labor’s watch and that there had been little or no attempt to implement concerns raised by the Auditor-General in 2000 and the Victorian Competition and Efficiency Commission in 2005,” Mr Guy said.

The Ombudsman’s report also found that the Building Practitioners Board “could not have confidence that only competent, suitably qualified and experienced practitioners were registered to undertake building works in Victoria. This represents a substantial risk to public safety”.

Key findings include that the Victorian Building Commission:

  • incurred significant expenditure for investigative services provided by external investigators engaged as contractors
  • was several million dollars over budget on an information technology project
  • employed former police officers as investigators with little or no building experience.

“Additional matters investigated during the investigation related to the core functions of the Commission and the Building Practitioners Board, including its registration system for building practitioners,” the report said.

Mr Arnel also said that media claims that Victorians were placed at “significant risk” by activities of the Building Commission were “ridiculous”.  The Ombudsman’s remark “clearly states that the ‘registration process creates risk and opportunities for maladministration and misconduct to occur’.

“This does not equate to anything close to a ‘significant risk’.  The standard of the buildings constructed in Victoria is extremely high, confirmed by the quality of the workmanship and the significant safety checks,” Mr Arnel said.

Following is a media statement issued by Tony Arnel

The Ombudsman investigated alleged corruption at the Building Commission.  While it is disappointing that such allegations have been made, I am pleased to say that his investigation found no evidence of systemic failure.

Media claims that the safety of Victorians has been put at ‘significant risk’ is ridiculous when the Ombudsman’s remark clearly states that the ‘registration process creates risk and opportunities for maladministration and misconduct to occur’.  This does not equate to anything close to a ‘significant risk’.  The standard of the buildings constructed in Victoria is extremely high, confirmed by the quality of the workmanship and the significant safety checks.

Having read the Ombudsman’s report, I note that he expanded the investigation to look at expenditure on marketing and hospitality.  On this front I provided the Ombudsman with significant material explaining that the expenditure was consistent with the Bracks and Brumby Governments’ policy which was to engage with the industry in order to deliver significant policy outcomes.  There is no logical connection between the alleged corruption and the close ties between the Building Commission and senior representatives of the building industry who contributed to some outstanding achievements during my time as Commissioner.

These achievements include:

  • The introduction of the 5 Star energy rating in Victoria, an Australian first leading all other states and territories
  • The introduction of rainwater tanks and major water saving initiatives in building as a result of the drought
  • Introduced world leading bushfire protection to houses and safety shelters
  • Leading the building industry response after the black Saturday fires
  • The incorporation of advanced sustainable design requirements into the Building Code of Australia
  • A Building Commission that is viewed by other states, as the leading building administration body in Australia
  • A regulatory process that allowed the Victorian building industry to grow by 250% in 10 years with extremely high levels of consumer confidence

These achievements would not have been possible without the close cooperation of the building industry.  The marketing and hospitality offered on occasion by the Building Commission was one of a number of approaches taken to create an environment in which the industry could be encouraged to embrace reforms such as developing the 5 Star energy rating.

During the time that the travel expenses were incurred, I represented Victoria as the Chair of the Green Building Council of Australia (head office in Sydney) and as a representative of the Australian Building Codes Board (located in Canberra).  I also represented Australia as the Chair of the World Green Building Council.  All of these roles required significant travel and all travel expenditure was endorsed by the Departmental Secretary.  Some of the travel also had the endorsement of the Minister of the day.

In relation to Mr Brilliant, who is mentioned in the report, I instigated an investigation into aspects of his conduct in mid-2011.  The results are now a matter of public record.

In conclusion, it is important to note that consumer satisfaction and confidence remains at a high level, at more than 90 per cent (according to the current Building Commission website), and the Victorian building regulatory system continues to be recognised internationally as one of the best systems in the world.
I am proud of the achievements of the Commission during my term and I am confident that the expenditure was not just appropriate but it was a major factor in achieving many of our key outcomes.

Following are highlights of the Victorian Ombudmans report, “Own motion investigation into the governance and administration of the Victorian Building Commission,” December 2012?

The Victorian Building Commission:

  • incurred significant expenditure for investigative services provided by external investigators engaged as contractors
  • was several million dollars over budget on an information technology project
  • employed former police officers as investigators with little or no building experience.

Additional matters investigated during the investigation related to the core functions of the Commission and the Building Practitioners Board, including its registration system for building practitioners.

The registration process

My investigation identified concerns with the vulnerability, integrity and administration of the registration system for building practitioners. This system is overseen by the Building Practitioners Board (the Practitioners Board) with administrative support from the Commission.

The registration process creates risk and opportunities for maladministration and misconduct to occur, including:

  • applicants who fail core stages of the competency assessment were allowed to advance to the final assessment stage, and were often granted registration as a licensed builder
  • poor administration of the competency assessment process with applicants sitting the wrong type of test or not sitting a test at all
  • a lack of evidence of the assessment process such as the absence of results of individual tests recorded on practitioner files
  • the former Registrar of the Practitioners Board failed to declare a number of business interests in the building industry that he and his wife had
  • the former Registrar of the Practitioners Board assessed and approved applications, including for persons known to him, without oversight from the Practitioners Board or any other third party
  • the Practitioners Board failed to scrutinise many applications before it. In the majority of cases the Practitioners Board relied solely on the recommendations provided to it by Assessors and the Registrar, which in effect made them the default decision makers. The Practitioners Board therefore added little value to the registration process.

I am of the view that, as a result of these concerns, the Practitioners Board could not have confidence that only competent, suitably qualified and experienced practitioners were registered to undertake building works in Victoria. This represents a substantial risk to public safety.

Governance and administration

Prior to the appointment of the new Commissioner in February 2012, significant public funds were spent by senior executives of the commission on questionable entertainment, hospitality and sponsoring industry bodies’ events and awards. Examples of this expenditure included:

  • over $200,000 on meals and entertainment over a three-year period
  • over $100,000 spent in 18 months on entertaining at sporting events such the AFL and Australian Open Tennis
  • a policy that allowed staff to spend up to $500 on meals and hospitality before management approval was required
  • over $300,000 incurred by the former Commissioner and another Director over a three-year period on overseas travel connected to the former Commissioner’s involvement with the Green Building Council of Australia and the World Green Building Council
  • nearly $950,000 expended in less than four years on sponsoring various events and awards run by bodies such as the Master Builders Association of Victoria and Housing Industry Association of Victoria.

I do not see any justification for the Commission to spend significant public funds on meals and entertainment for external stakeholders or its staff. In my view there is an inherent conflict in the Commission providing this entertainment when its core function is the regulation of the people it is entertaining.

This investigation identified excessive expenditure by the commission to implement its information technology program ‘e-toolbox’, from an initial contract amount of $698,000 to over $4.65 million. My investigation identified that the project was plagued with poor planning, insufficient resources and the commission’s decision to engage an employee of the vendor, at around $24,000 per month to manage the project and represent its interests.

Recruitment
There were a number of recruitment practices involving both contractors and internal staff that were in breach of the Commission’s policies and Government procurement guidelines. For example:

  • the appointment of a contractor to a number of executive positions within the Commission over a three-year period without a competitive tender process. This included a 12-month engagement when he performed duties including Acting Deputy Commissioner for which he was paid nearly $350,000
  • the engaging of external investigation contractors without competitive tender process, and for six years, without formal contracts at a cost to the commission of $3.15 million
  • re-engaging a former internal investigator as a contractor three days after he left the Commission. The former employee earned nearly triple his previous annual salary in his first 12 months as a contractor.

Examples of cronyism were also identified within the commission’s Audit and Investigation Unit, resulting in the unit being staffed almost exclusively with former Victoria Police officers. Examples include:

  • a former manager knowingly employing a former police officer with a questionable background including criminal records
  • a manager and director failing to take appropriate action upon learning that a probationary employee was under investigation by his former employer, Victoria Police, for theft and drug possession offences
  • a failure by the Commission to conduct criminal records checks as part of their recruitment processes which would have identified matters of concern in the backgrounds of a number of employees
  • a manager editing the key selection criteria of an applicant to assist him and subsequently forwarding it on to HR before the applicant was formally interviewed for the position
  • a practice within the Audit and Investigation Unit where some applicants for positions were ‘informally’ interviewed over coffee by Commission staff before the proper recruitment process.

My investigation also identified that a sum of $124,978 was paid to the former Building Commissioner Mr Tony Arnel following his resignation on 30 January 2012 which was significantly over and above that provided for in his contract.

In February 2012 the state government appointed Mr Michael Kefford as the new Building and Plumbing Industry Commissioner. A number of the staff who oversighted the practices and issues highlighted in my investigation have now left the commission. However, there are still a number of aspects of the governance and administration of the commission and the processes for which it is responsible that continue to require attention to ensure that the same issues do not arise again. The current Commissioner has taken steps to address many of these issues.

Recommendations
I made a number of recommendations to the Commission, the Practitioners Board and Department of Planning and Community Development, including that the Practitioners Board:

  •   set a threshold score for each stage of the assessment process which must be achieved before an applicant can progress to the next stage; and require applicants who fail any stage of the assessment to reapply

And that the Commission:

  • review its practice of providing meals and entertainment to external stakeholders, particularly those who are members or representatives of the industry practitioners it regulates
  • require new employees to undergo a criminal records check to be completed by way of finger printing as part of the pre-employment process
  • require employees to complete and sign a statutory declaration in relation to their prior work history, including whether they are, or have ever been, the subject of an investigation by a law- enforcement agency or current/former employer for any matter whether criminal or disciplinary.

In response to my draft report Mr Kefford stated:

I would like to assure you that I take the issues you have highlighted within your draft report very seriously and in some cases have already initiated actions within my control to address these and others where I have had prior opportunity to observe inappropriate practices.

New authority
On 29 November 2012, the Minister for Planning the Hon Matthew Guy MLC announced the Government’s proposal to reform regulation of the building industry by absorbing the functions of the Building Commission, the Plumbing Industry Commission and the Architects Registration Board into a new body: the Victorian Building Authority.

The establishment of a new structure and new body provides an opportunity to consider the conduct and processes described in this report, and the recommendations I have made, so as to establish a system that addresses the defects identified during this investigation.

Statement from the Victorian Planning Minister Matthew Guy issued last week.

Planning Minister Matthew Guy today welcomed the Victorian Ombudsman’s report into the governance and administration of the Victorian Building Commission, primarily under the former Labor Government.

The findings in the Ombudsman report focus on three primary areas; a failure of governance and administration; inappropriate registration of building practitioners; and questionable recruitment processes for key staff, including investigators between 2009 and 2011.

Mr Guy said the report highlighted how standards in the management and governance of the Building Commission had eroded under Labor’s watch and that there had been little or no attempt to implement concerns raised by the Auditor-General in 2000 and the Victorian Competition and Efficiency Commission in 2005.

“Governance issues and largesse and extravagant sponsorship had been out of control at the Building Commission until the appointment of the new Commissioner Michael Kefford,” Mr Guy said.

“The Ombudsman has found serious concerns in relation to a number of issues, particularly regulatory and corporate hospitality. The Coalition Government will act on these concerns.”

The Ombudsman has found that expenditure included nearly $950,000 in less than four years on sponsorship; over $500,000 on interstate and overseas travel and accommodation; and over $200,000 on meals and entertainment.

Mr Guy said this behaviour is completely inappropriate, particularly as these funds are sourced from Victorians who are trying to purchase their home or operate their business.

“The Ombudsman’s findings into the mismanagement of public funds are matters that the Coalition Government takes seriously and will act on straight away,” Mr Guy said.

Mr Guy also raised concerns with the findings in relation to the registration processes and noted that improved governance arrangements as part of the new Victorian Building Authority, including a CEO and new Board, would go a long way to resolving concerns around registration.

“Specifically in relation to Recommendation 9, the Coalition Government will direct the Commission to review all applications approved by the registrar of the Building Practitioners Board over the period highlighted in the Ombudsman’s report. Upon review, any applications inappropriately approved would trigger a full audit of the builder’s registration and associated projects,” Mr Guy said.

“The Coalition Government has already acted to restore accountability and confidence into the building industry regulator.”

“We have announced a new Victorian Building Authority which is planned to see the functions of the Building Commission, Plumbing Industry Commission and the Architects Registration Board absorbed to provide a single point of governance for builders, plumbers and architects,” Mr Guy said.

In addition, in February 2012, the Coalition Government appointed a new Commissioner to impart cultural change and to ensure the actions of the building regulator are above reproach.

“Since the appointment of Michael Kefford as the Building Commissioner and Plumbing Industry Commissioner he has set about the task of implementing the Coalition Government’s reform agenda across the organisation,” Mr Guy said.

Significant progress has been made in the development of a comprehensive reform program that not only responds to the findings of the 2011 Auditor-General report into Compliance with Building Permits, but goes beyond, to tackle broader organisational and operational matters.

The Ombudsman’s report supports the establishment of the new Authority and states that it provides an opportunity to consider the conduct and processes in question. The Authority will focus on being a regulator first, not a participant and will have a transparent structure with a publicly-appointed board.

“The Coalition Government will review the recommendations in the Ombudsman’s Report and will ensure the integrity of Victoria’s building industry is restored,” Mr Guy said.