The Independent Broad-based Anti-corruption Commission released its special report into the dangers of corruption in procurement processes after investigating Darebin and Ballarat councils.

In the case of the City of Ballarat, IBAC began investigating the behaviour of the council's then 'Manager Sports and Recreation' Lukas Carey in November 2015 and made the following allegations:

Carey was later convicted of the offences of 'obtaining financial advantage by deception, attempting to commit an indictable offence and soliciting secret commissions.'

He was sentenced to three years' imprisonment and ordered to repay $31,200 to the City of Ballarat Council, according to the report.

Carey's wife Jasmine, Rik McCaig and Derryn Ladson were also found guilty of involvement in Carey's criminal activity, which defrauded the city's ratepayers to an amount of almost $200,000.

At the time of his offending, Carey was being paid $133,000 a year by the City of Ballarat.

The 55-page report makes specific reference to shortcomings in Ballarat council's oversight of procurement policies and the ease with which Carey manipulated those council policies to make fraudulent claims.

It also found City of Ballarat's own investigation into the matter to be inadequate, and council's then 'General Manager' and 'Chief Financial Officer' did not consider themselves to be investigating fraud, but rather a conflict of interest matter.

They failed to keep written notes of their meetings about the matter, beyond the most basic documentation.

It found that, despite having a 'conflict of interest' reporting policy requirement in place, Carey had never advised of any conflict of interest.

This was not unusual at the City of Ballarat, according to IBAC's investigation.

"In a statement to IBAC, the procurement coordinator at the time of the investigation indicated he was responsible for managing conflicts of interest in council dealings and had only been advised of a conflict of interest on 'about six occasions' in the three and a half years that he had occupied the role."

Council also failed to actively segregate duties and rotate employees, or monitor that segregation, which may have prevented the abuse and corruption of the procurement process. It allowed Carey and his partners to submit, approve and review the fraudulent claims for work without adequate scrutiny.

For example, Carey was able to increase the financial delegation of one of his subordinates from $1000 to $20,000, and then instruct his subordinate to approve payment for invoices he submitted, the report says.

This created the false impression these roles were segregated.

The report was also scathing about City of Ballarat's oversight of senior employees, and said council's original investigation of Carey's behaviour was 'poorly conducted and failed to identify clear policy breaches.'

Council's audits failed to recognise details such as the telephone number used by one of the companies involved in the fraud was in fact Carey's wife's own number and had been supplied to council previously.

Another of his co-convicted, a director of one of the companies involved in the fraud, had provided Carey with a reference check prior to his employment with City of Ballarat.

IBAC recommended the council develop a stronger code of conduct for procurement, and report back in 12 months on the vulnerabilities it had identified within council.

City of Ballarat chief executive officer Justine Linley responded to the report this afternoon with an extensive statement, accepting IBAC's report.

"As CEO of the City of Ballarat I have accepted, implemented, and will report on the recommendations of the IBAC "Special report on corruption risks associated with procurement in local government" tabled in State Parliament today," Ms Linley wrote.

"Since 2016, the City of Ballarat has worked on a detailed reform agenda and continuous improvement in relation to procurement, fraud and risk identification and prevention, conflict of interest and officer conduct.

"We have already considerably strengthened our procurement policies, systems and practices to address the majority of the vulnerabilities identified in the report...

"However, since I began my tenure as CEO I have always accepted there is room for further improvement and, together with my Executive Leadership team, committed to a rolling program of reform over and above the annual review requirements.

"This reform extended to re-setting the organisation's culture, to greater internal communication and staff training, to ensuring that all staff are not only aware of but understand their responsibilities as public servants.

"Often staff can be concerned about repercussions from calling out or questioning activity or behaviours that they feel, believe or suspect may not be right."

Read CIty of Ballarat CEO Justine Linley's full response here.

Minister for Local Government Adem Somyurek said in a statement: "We'll take the time to properly review IBAC's report and recommendations in full and I strongly encourage councils to also use IBAC's findings to strengthen their own protocols."

You can read IBAC's report in full here.