In October 2011 the NSW Independent Commission Against Corruption (ICAC) began an investigation into 110 local government and public authorities.
Ballina, Byron, Bellingen, Clarence Valley, Lismore and Tweed councils were on ICAC’s list.
The
Commission obtained evidence indicating that gifts in excess of $116,000,
including gift vouchers totalling at least $64,380, were provided to public
officials working for the majority of the 110 authorities over the period
reviewed.
From the outset of the ICAC's investigation, it became apparent that the provision of incentives by businesses to public officials in NSW was widespread.
Given the sheer scale of the alleged corrupt conduct and the finite resources and time at the ICAC's disposal, the ICAC decided to focus its investigation on the conduct of employees of 15 of the 110 public authorities in NSW whose staff were alleged to have received gifts from suppliers.
These 15 public authorities, selected after assessing a number of factors including the value of the gifts received, were Ballina Shire Council, Bathurst Regional Council, Broken Hill City Council, Burwood Council, Byron Shire Council, the Council of the City of Botany Bay, the Council of the City of Sydney, Lithgow City Council, Liverpool City Council, Narrandera Shire Council, Orange City Council, the Roads and Traffic Authority, Walgett Shire Council, Waverley Council and Yass Valley Council.
The ICAC found that the following people engaged in corrupt conduct by receiving gifts and benefits from supplier companies as an inducement to continue placing orders with these companies or as a reward for placing orders with these companies: Glen Lapham of Ballina Shire Council, Graham Gibbons of Bathurst Regional Council, Anthony Harman of Broken Hill City Council, Ronita Tompsett of Burwood Council, Robert Vagne of Byron Shire Council, Donald Harris of the Council of the City of Botany Bay, Jeffrey Duncum, Edwin Roger Martin, Christopher Myers and Robert Nies of the Council of the City of Sydney, Steven McMurtrie and Lee Warner of Lithgow City Council, Maxwell Bancroft and Amjad Maaya of Liverpool City Council, Mathew Kelly of Narrandera Shire Council, Peter Evans and Peter Lewis of Orange City Council, Phillip Burnie of the Roads and Traffic Authority, Mark Ward of Walgett Shire Council, Scott Ingwersen and Peter Naidoo of Waverley Council, and Kerry Smith of Yass Valley Council.
More generally, the Operation Jarek Investigation Report (October 2012) found that:
In NSW, most local councils and public authorities have a code of conduct and a gift register. Many have a policy banning the receipt of gifts and provide training to their staff on this policy.
Despite this, the investigation by the Independent Commission Against Corruption (“the Commission”) found that a large number of public officials across 110 agencies took gifts without declaring them, contrary to such policy and training.
The gifts accepted far exceeded any reasonable concept of token value, and included holidays, television sets, camcorders, DVD players, iPads, iPhones, coats and gift vouchers.
The Commission found that agencies generally focused on having rules in place around the acceptance of gifts, but did not consider corruption risks in the broader relationship between buyer and supplier, and the opportunity for corruption in their procurement and inventory management systems…..
The Commission has made 15 corruption prevention recommendations to all councils in NSW, as it is evident that the conduct uncovered in this investigation is systemic and all councils should take action to mitigate these risks.
While the recommendations are mainly aimed at local councils, the Commission considers that other public authorities can also learn from this investigation and they are encouraged to read this report and the recommendations contained herein.
Recommendation 1
That councils communicate to suppliers a clear set
of supplier behaviour expectations and the associated
consequences for non-compliance.
Recommendation 2
That councils develop a proactive and comprehensive
supplier engagement framework.
Recommendation 3
That councils review their codes and policies on gifts and
benefits to ensure they effectively communicate expected
behaviour in a way that the intended audience can easily
grasp.
Recommendation 4
That councils ensure that their policy provides that all staff
who hold financial delegations are prohibited from receiving
gifts of any kind.
Recommendation 5
That councils ensure that staff training on gifts has a focus
on the disciplinary consequences of accepting gifts.
Recommendation 6
That councils assess which of their staff members operate
in an environment where relational selling is commonplace,
and equip these staff members to recognise and respond to
these sales tactics, including the offer of gifts.
Recommendation 7
That councils, if they have not already done so, analyse
their procurement processes to identify points of
corruption risk and take steps to improve the design of their
procurement processes.
Recommendation 8
That councils, if they have not already done so, consider
introducing e-procurement as an efficient method of
controlling possible vulnerabilities in their system.
Recommendation 9
That councils, if they have not already done so, review
which reports are available to the managers of stores and
ensure they (councils) can generate a report showing the
orders placed by any individual across all cost centres.
Recommendation 10
That councils, if they have not already done so, analyse
inventory management systems with a view to improving
controls and reducing waste.
Recommendation 11
That councils examine options for control of their
pull-based inventory and implement an option that is
suitable for their operations.
Recommendation 12
That councils, if they have not already done so, organise
their stores so that all items are labelled clearly, stock is
securely stored and movement of all goods in or out of the
store is recorded on an integrated inventory management
system.
Recommendation 13
That councils ensure stocktakes are conducted
independently of store officers and by staff knowledgeable
about the principles of stocktaking.
Recommendation 14
That council management assesses the residual risk in its
store and, if appropriate for the organisation, conducts
random spot checks or cycle counts of select aspects of
inventory management.
Recommendation 15
That councils, if they have not already done so, consider
the risks highlighted by this report, namely,
• relational selling and gift giving
• procurement processes
• inventory management,
and, where they consider the council is at risk, add these
topics to their internal audit programs.