Credit card deception by former Warrnambool Council Manager ‘greater than had been exposed or admitted to’: Ombudsman

A former Warrnambool Council Manager misused his corporate credit card to claim at least $8,000 worth of goods and services which were excessive or for his personal benefit, Victorian Ombudsman Deborah Glass has found.

Ms Glass said David McMahon, former Manager – Visitor Economy, engaged in misconduct by seriously departing from his responsibilities to act with integrity and honestly report his financial transactions.

Mr McMahon resigned from the Council in mid-2019, after having repaid about $8,000. Ms Glass has recommended the Council make further enquiries regarding Mr McMahon’s credit card use, and consider referring the matter to Victoria Police.

Tabling her Investigation into credit card misuse at Warrnambool City Council in the Victorian Parliament today, Ms Glass said credit card misuse at the Council was not widespread.

“The conclusion of this investigation is that while there is evidence of lax practices by staff and poor judgement by some in senior management, credit card misuse was not widespread,” Ms Glass said.

“Serious misuse was limited to one individual, although the level of abuse was greater than had been exposed or admitted to, in some instances also suggesting a deliberate intention to deceive,” she said.

“The people of Warrnambool do not expect their hard-earned payment of rates to be funding espresso martinis, travel to Melbourne coinciding with football games, spa resort massages for family members, or hundreds of dollars in alcoholic beverages, described on the invoice as ‘Room Hire’.”

Ms Glass found that in November 2018, the Council’s then-CEO gave Mr McMahon a first and final warning for misuse of a Council credit card, and Mr Mahon repaid approx. $5,000.

She said that at the time of the warning to Mr McMahon, the then-CEO should have referred the matter for further investigation, which may have resulted in other inappropriate transactions coming to light.

“Senior management could and should have done more at the time the misuse was first exposed in 2018,” Ms Glass said.

“Although this inaction was neither dishonest nor systemic, it gave rise to the impression of a cover-up. The then-CEO told us he ‘would have dealt with it differently’ had the full picture been known at the time – an important, indeed painful lesson that integrity rules exist for a reason.”

Mr McMahon ultimately resigned in July 2019, after a discussion with the new CEO prompted by local media reports about the Council’s credit card spend. Upon his resignation, Mr McMahon repaid an additional approx. $3,000.

Ms Glass said the community’s “impression of large numbers of snouts in the public trough was exacerbated by the Council’s overly generous hospitality policies”.

She said while the Council’s ‘Support Local’ strategy was well-intentioned, it had undermined public confidence in the integrity of Council officers. Under this strategy, some Council officers were encouraged to hold work-related meetings at local cafes and restaurants.

“It was understandable that Council should wish to support local traders affected by the city centre construction works,” she said.

“But to an observer, the holding of meetings by Council officers in local cafés and restaurants was no different from staff going out for lunches and coffees on the public purse.

“Combined with lax adherence to processes and insufficient oversight by some, it is not surprising these public displays of eating and drinking gave rise to the impression they apparently did.”

Ms Glass noted Council had made several improvements to its credit card policies and procedures since late 2018 including:

• Alcohol is no longer permitted to be charged to a Council credit card.
• The number of Council staff with credit cards has been reduced, from 93 in 2018 to 70.
• Council staff who have credit cards must now complete an online training course which provides them with information on their roles and responsibilities.

Please note: Ms Glass will not be available for interviews about this investigation, due it being about the conduct of individuals. Her report is covered by parliamentary privilege.

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