Shared Services - get the Governance right!

LG Leader December 2019

In this era of continued scrutiny of council expenditure, more and more effort is being devoted to looking for options that deliver greater efficiencies. Just one of these options that we have assisted with is the implementation of shared-service arrangements.

There are a number of models for shared services to cater for the different circumstances in which they are to apply. However, relevant for all models is the importance of the participating councils addressing adequate governance arrangements, including to ensure that the decision-makers on behalf of the councils are properly authorised.

Relevant in this context is whether or not the council can delegate (or the chief executive officer can sub-delegate), powers/functions to an employee of another council who is tasked with undertaking functions for both councils as part of the shared-service arrangement. This is particularly important because the Local Government Act 1999 operates to restrict to whom (or what) a delegation or sub-delegation can be made.

Specifically, a council may only delegate (and a chief executive officer may only sub-delegate) powers and functions to a natural person if that person is an employee of the council or, appointed by the council as an ‘authorised person’ under section 260 of the Act.

The ability exists for a chief executive officer of a council to appoint (in accordance with his/her delegated powers) an authorised person who is a person who is not an employee of the council. Where this occurs, the non-employee is in a position to receive and to act upon subdelegated powers and functions, including to give effect to a shared service arrangement.

However, where this approach is taken, in order to mitigate the risk of the individual inappropriately exercising powers and functions that he/she should not be exercising, it is necessary to, firstly, consider what, if any, conditions or limitations should be imposed on the non-employee’s appointment as an authorised person. Thereafter, it is necessary to ensure that all appropriate conditions or limitations are properly and clearly articulated in the instrument of appointment.

For further information regarding the above and/or shared service arrangements generally, please contact Cimon Burke on 08 8113 7105 or at cburke@kelledyjones.com.au.