At least three Victorian councils have been compelled to upgrade their IT systems after a series of strong rebukes from the state's auditor general over their supply relationships.
The latest auditor-general report criticised councils for continuing to buy from suppliers without going through an official tender process, even when the value of purchases over time exceeded legislated thresholds.
Councils are required by law to publicly tender contracts worth $150,000 or more for goods and services and $200,000 or more for capital works.
But the report found "many instances where cumulative payments to suppliers over time had exceeded the public tender thresholds".
"Deliberate contract splitting was not evident in these cases", the report said. And while councils weren't required by law to tender in these instances, the auditor-general believed it to be "good practice... where an established, ongoing need is identified" for products from a supplier to put it out to tender.
Three of the five Victorian councils included in the audit - the Cities of Casey and Yarra and Colac-Otway Shire Council - "had either implemented or initiated upgrades of their information systems to enable better oversight of procurement and expenditure."
Yarra upgraded its systems last year after an internal audit in 2007 identified 11 suppliers that received aggregate payments over the public threshold. Four suppliers "received payment in excess of $350,000."
The City of Greater Bendigo also "took action to strengthen its oversight" during the audit, the auditor-general said.
It drew criticism in the report on several fronts, notably over the security of tender documents.
"All councils except Bendigo had taken reasonable steps to protect the security of tender documentation," the report said.
"Bendigo needed to better assure that access to electronic contract documents is restricted to authorised personnel and that physical contract files are stored securely. Bendigo took action to address this during the audit."
Bendigo was also the only council audited that did not centralise tender administration.
However, all councils audited had decentralised responsibility for managing and varying contracts to individual business units.
"This lack of central oversight resulted in a level of inadequate and inconsistent practice," the report said.
Although councils had committed to act, the auditor-general warned that "the upgrade of local information systems had generally delayed implementation" of improved procurement practices at the councils it audited.
Only the City of Casey's chief executive Mike Tyler expressed concern that parts of the report "unfairly represent Council's practices and procedures."
"Could you please insert the following formal comments into your report: "Council has comprehensive systems in place that are not referred to in the report. Despite this, Council acknowledges that there is room for improvement and has addressed, and is continuing to address, comments raised"," he said.