Local Government Minister Shelley Hancock has cautioned Dubbo councillors against making allegations of wrongdoing or interfering in code of conduct matters.
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Ms Hancock announced on Tuesday that she was intending to issue a Performance Improvement Order (PIO) to Dubbo Regional Council.
It requires each councillor to improve their behaviour and appoints an independent temporary advisor to ensure compliance.
In a letter issued to mayor Ben Shields and acting chief executive officer Dean Frost, Mrs Hancock outlined seven reasons as to why she was proposing a PIO.
"There is evidence that some council staff are feeling bullied and harassed by some councillors which has resulted in them having to seek medical advice and have time off work," Mrs Hancock said in the letter.
Another reason said there was evidence council staff were unable to "effectively fulfill their roles" due to bulling and harassment as well as evidence councillors had been "unpleasant and intimidating" in their correspondence to senior staff.
"After a turbulent period the NSW government is becoming involved to ensure Dubbo Regional Council gets back on track," Mrs Hancock said in a statement on Tuesday.
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"This proposed PIO is intended to lift councillor standards of behaviour, ensure proper processes are followed, protect health and safety of staff, provide strict supervision, and encourage community confidence in Dubbo Regional Council."
Mrs Hancock said the NSW government was monitoring the situation closely.
If it goes ahead, the order forces each councillor enter into a written undertaking to conduct themselves in a manner that does not constitute bullying or harassment of council staff, refrain from making public allegation of wrongdoing against other council officials and refrain from interfering in code of conduct matters.
It also calls for the chief executive officer to develop a formal system to manage requests from councillors to council staff and for recent changes to the mayoral fees to go on public exhibition.
As determined by the Local Government Act, the minister has provided council with a notice of intention to issue the PIO and given it seven days to make a submission.
The minister must consider any submission before making a final determination on whether to issue the order.
If the PIO is not complied with, Mrs Hancock said she may consider temporarily suspending the council.
Mrs Hancock's announcement comes just one day after mayor Ben Shields announced he would be resigning from council.
Last week it was determined that acting chief executive officer Dean Frost would return to his role as director and Murray Wood, who left council in 2018, would take on the top job for 12 months.
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