Regulating Gambling and Liquor

Tabled: 8 February 2017

Audit overview

Abuse of alcohol and problem gambling can cause significant harm for individuals, families and the community. Because of this, the government regulates both industries. It controls:

  • who can sell alcohol and gambling products
  • where people can buy and consume alcohol or gamble
  • what alcohol and gambling products may be sold
  • how and when alcohol and gambling products may be available.

In general, industry participants must be licensed, and the government's compliance-checking activities seek to ensure that licensees comply with the legislation and conditions of their licences.

The government established the Victorian Commission for Gambling and Liquor Regulation (VCGLR) in 2012 by bringing together the functions and resources of two predecessor regulators—the Victorian Commission for Gambling Regulation (VCGR) and Responsible Alcohol Victoria (RAV). The VCGLR is headed by the chair and commissioners, known as the Commission.

The government's aim was to create a modern world-class regulator—one that would apply an integrated and risk-based approach to regulation—in order to deliver more efficient and effective regulation, and compliance monitoring and enforcement, with a focus on minimising harm.

VCGLR has faced significant challenges since its establishment. Its creation coincided with significant changes in the gambling industry, including Victoria's move to allow venue operators to own and operate electronic gaming machines. This ended the previous duopoly arrangement where two companies owned all electronic gaming machines in Victoria outside the Melbourne casino. VCGLR's budget and staff were reduced by around 30 per cent in the four years from 2012, compared to the resources of RAV and VCGR, which had a combined budget of $41.3 million and staff of around 287.

VCGLR has also lost experience and expertise, with 24 experienced officers departing on redundancy packages offered as part of the Sustainable Government Initiative in 2012, followed by a further 22 redundancies up to mid-2014.

VCGLR inherited staff engagement and cultural challenges, including:

  • the second lowest staff satisfaction levels in the Victorian public sector, as measured by the 2012 'People Matter' survey
  • 12 industrial and employee relations matters carried over from RAV, including performance management cases and a serious bullying case
  • dissent between compliance inspectors and management at the time of VCGLR's establishment over the decision to bring in inspectors from RAV and VCGR at different pay levels and working conditions.

It also inherited information technology (IT) issues relating to the absence of a single IT platform across its liquor and gambling activities, which was not addressed until October 2015. An integrated IT system was originally intended to incorporate around 30 legacy IT systems into a single solution by mid-2014, but it was launched, after significant delays, in December 2016.

In May 2015, the Minister for Consumer Affairs, Gaming and Liquor Regulation outlined the government's significant concerns about VCGLR's ability to engender community confidence, and requested that the new chair of VCGLR review its capability and performance.

The chair reported to the minister in November 2015 that although VCGLR aspired to be a risk-based regulator, this ambition was either underdeveloped or unrealised in a number of areas of operation, particularly its compliance activities. The chairperson found there was a solid foundation to build on, but also found that VCGLR needed to address the following significant challenges as a matter of priority:

  • a lack of leadership stemming from delays in filling the chief executive officer role and an unstable management team
  • a critical need to develop a positive and unified workplace culture
  • inadequate and poorly implemented information and other systems and procedures
  • a lack of integration of gambling and liquor functions, particularly in the compliance division
  • the need for greater focus on compliance and enforcement activities relating to:
    • regional Victoria
    • the supply of alcohol to minors and intoxicated people
    • access of minors and intoxicated people to gambling activities
  • pressures throughout the organisation due to either resource constraints or possible misalignment of resources.

The chair recommended a number of measures to address these issues:

  • building VCGLR's leadership capacity
  • addressing serious systemic gaps in the compliance division
  • seeking additional budget to establish a presence in regional Victoria
  • reviewing and updating people and culture policies and practices
  • working better with other regulatory and enforcement bodies such as Victoria Police.

VCGLR has since acted to improve organisational culture and staff engagement, and there has been greater stability in the management team since mid 2015.

The minister's statement of expectations for VCGLR for 2016–17 indicated that it should:

  • develop regional hubs to support compliance efforts in regional Victoria
  • review standard liquor licence conditions to determine if they are effective and appropriate for minimising harm
  • further streamline licensing processes, including those that impose unnecessary duplication on industry
  • improve its service and determination times by enabling online licence applications for both temporary and permanent licences
  • make the Commission's published decisions available in a form that is modern and more readily searchable
  • deliver a modern inspection and compliance IT system to better support risk‑based regulation
  • refine its risk-based approach to assessing and determining licence applications
  • refine its risk-based approach to compliance activities to appropriately target the supply of alcohol and gaming to minors and the supply of alcohol to intoxicated people
  • implement a consistent ongoing formal training program to support compliance inspectors to undertake their role effectively
  • develop performance indicators aligned with VCGLR's strategic priorities, particularly harm minimisation, evidence-based decision-making and co‑regulatory activities.

VCGLR took action during 2015 and 2016 to address the issues and recommendations arising from the chair's review and the minister's statement of expectations. This included undertaking additional assessments of priority activities and seeking additional funding from government to establish a regional presence.

Against this background, in this audit we assessed VCGLR's licensing and compliance functions, its performance measurement and reporting, and its collaboration with other agencies. We also followed up on our recommendations from two previous audits, Taking Action on Problem Gambling in 2010 and Effectiveness of Justice Strategies in Preventing and Reducing Alcohol-Related Harm in 2012.


VCGLR's plans and actions to further develop its risk-based approaches to licensing and compliance are largely sound, and its recent focused attention to improving the way it manages, develops and deploys its regulatory staff, particularly compliance inspectors, is encouraging.

However, these actions are not yet complete and the scale of required reform is significant, meaning that much work remains for VCGLR to become a fully effective regulator.

Ongoing challenges in merging the people, systems and cultures from VCGLR's two predecessor regulatory bodies, along with the lack of a sufficiently risk-based approach, have precluded VCGLR from fully realising the benefits expected when creating a single regulator.

These significant shortcomings continue to reduce assurance that VCGLR's efforts are adequate to protect the Victorian community from the harms associated with the misuse and abuse of liquor and gambling.

To this end, VCGLR also needs to improve the way it measures and publicly reports on its performance to provide genuine insight into its effectiveness as a regulator in minimising harm, and in ensuring the integrity of the liquor and gambling industries.



VCGLR has made limited progress over the past two years in reorganising the licensing division, training staff and providing improved guidance material to start moving towards a more risk-based approach to licensing activities.

Much work remains and weaknesses in VCGLR's approach mean it still cannot demonstrate that it properly examines and assesses all licensing applications in line with legislative provisions before approving them. These weaknesses are more significant for liquor applications and arise because VCGLR largely accepts the information provided to it by these applicants at face value. It relies heavily on both the honesty of applicants and the diligence of Victoria Police and potential objectors to raise issues about the suitability of applicants, amenity issues or social harms associated with these applications.

The provisions of the Liquor Control Reform Act 1998 provide some basis for VCGLR to rely on the information submitted by applicants and the absence of objections when deciding on licence applications. However, this may not be sufficient to meet the legislative intent for VCGLR to minimise harm and prevent criminal influence and exploitation. We identified instances where VCGLR granted licences without fully identifying and assessing the suitability of applicants and their associates, including cases where applicants had not provided complete information on their associates and past criminal convictions.

VCGLR has recently acted to address weaknesses in its quality assurance for licensing processes and needs to continue its work developing a more robust, risk‑based approach to scrutinising applicants.


VCGLR has not adequately monitored compliance with gambling and liquor legislation.

Compliance activities are not sufficiently risk based because VCGLR has focused on meeting a target number of inspections, rather than directing inspections to where noncompliance has a high risk or high potential for harm. This approach to compliance does not support the legislative objectives for harm minimisation.

VCGLR has not adequately managed its compliance monitoring functions due to longstanding serious and systemic weaknesses in the design and operation of its compliance activities. Key issues include:

  • inflexible allocation of resources to compliance activities based on factors other than risk
  • a management approach and culture focused on meeting quotas, which encourage superficial inspection activities rather than activities to address harms
  • inadequate guidance and training for inspectors
  • unreliable data about liquor and gambling inspections.

VCGLR has identified and started to address many of these issues since late 2015, and its proposed actions to better organise and train its inspectors and target its activities based on relevant data and indicators of risk are reasonable. However, these actions are not yet sufficiently developed for us to assess whether they will improve the effectiveness of VCGLR's compliance activities in minimising harm and protecting the community.

Casino supervision

VCGLR is responsible for regulating and monitoring the Melbourne casino. It has acted to address the lack of a coherent organisation-wide approach to casino supervision across its licensing and compliance functions. However, its compliance division has not applied a level of focus on the casino that reflects its status and risk as the largest gaming venue in the state and its approach has lacked continuity.

VCGLR's predecessor operated with a team solely focused on supervising casino operations. Instead, VCGLR rotates all compliance inspector teams through the casino, but it has not supported them with adequate training, guidance and consistent management oversight.

As a result, VCGLR has not paid sufficient attention to key areas of risk in the casino's operations, such as detection of people excluded by Victoria Police, responsible gambling and money laundering. VCGLR has recognised these issues and has taken action to address this loss of expertise. It is now moving to establish a dedicated casino team.

Reporting on performance

VCGLR's publicly reported performance information provides limited insight into its effectiveness in meeting legislative objectives relating to harm minimisation. VCGLR largely measures and publicly reports on activity rather than its effectiveness or impact. It includes some information in its annual report on actions relating to its effectiveness. However, its emphasis on counting activities such as the number of compliance inspections has encouraged operational behaviour that focuses on matters with little relevance to, or impact on, harm minimisation.

VCGLR has improved its internally reported performance measures by introducing indicators that seek to measure the impact and effectiveness of its regulatory activities. It is now recording the proportion of venues with a previous breach found to be in breach on a subsequent inspection, and changes in the number of specific breaches following a targeted education campaign.

Reporting publicly on the results of these measures would provide more valuable and meaningful insight to Parliament and the community on the impact of VCGLR's activities, rather than the measures it currently reports on.

Relationships between the agencies

VCGLR and the Department of Justice and Regulation (the department) have worked cooperatively to implement new policies for both the gambling and liquor industries, including the collection of wholesale alcohol sales data. VCGLR also has formal and informal relationships with Victoria Police that have led to effective information sharing, however there is scope to broaden this relationship to better coordinate enforcement activities.

VCGLR has also taken steps to strengthen its engagement with a range of other regulators and agencies including VicRoads, AUSTRAC, local government, and agencies involved in the investigation of organised crime.

Implementing past VAGO recommendations

VCGLR, the department and Victoria Police have made progress in addressing the recommendations made in our two previous audits.

There is still work to be done by all three agencies, including development of a joint enforcement strategy for VCGLR and Victoria Police. The department has developed an evaluation framework for alcohol-related strategies but has not yet used it to assess strategies such as the overall success of the freeze on issuing late-night liquor licences in some inner-city municipalities.


We recommend that the Victorian Commission for Gambling and Liquor Regulation:

  1. amend its liquor licensing process to:
  • require applicants to provide evidence to show that all directors and associates have been disclosed
  • document its assessments against all relevant legislative considerations when determining applications, including applicant suitability, amenity issues, and risks of misuse and abuse of alcohol (see Sections 2.3.1 and 2.3.2)
  1. undertake ongoing checks of liquor licensees to ensure company changes have been disclosed, in line with the Liquor Control Reform Act 1998 (see Section 2.3.1)
  2. improve its guidance on assessment of licence applications, particularly for uncontested applications, and ensure licensing officers use this guidance (see Section 2.5.1)
  3. complete implementation of the licensing risk-based model by developing and implementing:
  • a set of risk indicators
  • checklists containing triggers for the escalation of applications within or between teams
  • a risk matrix to be considered through the determination phase (see Section 2.2.1)
  1. develop principles or guidance for assessing net detriment and report transparently against them in decisions on applications for electronic gaming machines (see Section 2.4.2)
  2. broaden its management reporting on licensing activities beyond the speed of processing applications to include quality indicators (see Section 2.6.2)
  3. conduct robust data integrity checks across all divisions, particularly when relying on data for reporting purposes (see Section 3.2.3)
  4. continue to revise the risk-based approach to compliance to ensure better targeting of compliance activities (see Section 3.3.1)
  5. complete its quality assurance framework for compliance, and ensure it focuses on key divisional processes that contribute to the targeting and quality of inspections (see Section 3.3.2)
  6. continue to roll out its training and ensure there is regular, ongoing training for compliance inspectors (see Section 3.3.2)
  7. complete its planned actions to improve the supervision of casino operations (see Section 4.2.4)
  8. work the Department of Justice and Regulation to improve the quality of its publicly reported performance measures to focus on the outcomes and impact of its work (see Section 5.2.1).

We recommend that the Victorian Commission for Gambling and Liquor Regulation and Victoria Police:

  1. develop a comprehensive collaborative enforcement strategy to more efficiently and effectively target harms associated with licensed premises (see Section 5.4.2).

We recommend that the Department of Justice and Regulation:

  1. develop performance measures to enable regular monitoring and reporting on the impact of liquor and gambling strategies and initiatives (see Sections 5.4.1 and 5.4.2).

Responses to recommendations

We have consulted with the Victorian Commission for Gambling and Liquor Regulation, the Department of Justice and Regulation and Victoria Police, and we considered their views when reaching our audit conclusions. As required by section 16(3) of the Audit Act 1994, we gave a draft copy of this report to those agencies and asked for their submissions or comments.

The following is a summary of those responses. The full responses are included in Appendix A.

All agencies responded and accepted our recommendations. VCGLR provided a detailed action plan on how it will address our recommendations, although noted that its ability to fully action all recommendations is dependent on the availability of funding.

Back to Top