Does Corruption in the Public Sector and Resulting ICAC Investigation Decrease Effective Management?

ICAC released a report into its investigation into corruption by an IT Manager through recruitment at the University of Sydney.  ICAC made 7 recommendations, however a number of them, in my opinion the recommendations are less than optimal.

A full copy of the ICAC report released on 24 October 2012 can be found at http://www.icac.nsw.gov.au/investigations/past-investigations/article/4167.

Below are the recommendations and my comments upon them:

  1. “That, where possible, the University of Sydney should establish a single point of access for employment of ICT contractors, using multiple C100 recruitment firms in competition.”

    Comment: This is a good recommendation.  Ideally, University of Sydney should identify a subset of recruitment firms that meet its particular needs for a defined timeframe.  This allows the recruitment firms to build an understanding of the needs and approaches by the university, and would allow those firms to invest in systems to integrate with the university to enhance the internal controls around recruitment and contract staff.

  2. That, where access to ICT contract employment is not feasibly managed through C100 firms in competition, the University of Sydney should establish the probity and competence of alternative recruitment firms independently of the views of operational university staff. Such a process should include the conducting of background checks.

    Comment:  There are several practical risks with this recommendation. The operational staff have the expert knowledge to consider and assess the expertise of alternative recruitment firms.  If ICAC is concerned about collusion, then it would be appropriate to have a multidiscipline team involved in the evaluation of alternative recruitment teams. This may include the HR representatives, procurement representatives and the operational area.Background check of any supplier, is part of good procurement practices and should be considered in all procurement, not just ICT contract employment.

    The ICAC recommendation is silent on why detailed checks are made for all vendors and not just for recruitment firms.

  3. That the University of Sydney implements its proposed financial analysis framework.

    Comment:  Whilst the recommendation to implement a financial analysis framework, the recommendation does not address the matter raised in the discussion.  Whilst different arms of the University have responsibility for procurement activities (e.g. goods, services, contract staff), there were gaps in the process that failed to identify the issue.  The use of electronic procurement tools and the associated analysis tools would assist in the management of these types of corrupt activities.  It is regrettable that many organisations see procurement of contract labour as so unique that they are not processes through an organisations standard procurement tools.

  4. That the University of Sydney’s management of contract labour through recruitment suppliers be the responsibility of SydneyRecruitment or a specialist unit.

    Comment: The report does not fully justify this recommendation.  In many private sector organisations, the recruitment transaction is undertaken in the business units with the central unit providing strategy, process and governance oversight.  There is a risk that this recommendation may lead to a different corruption risk and also organisational inefficiency.

  5. That the relevant University of Sydney’s policy for non-exempt general staff selection committees requires:
    • the presence of an independent member on selection committees
    • members of selection committees to be more senior than the position for which they are recruiting.



    Comment:  This recommendation that I have considerable difficulty with, and reflect that lack of good recruitment process.  One of the issues I have with f public sector requirement is the concept of the one meeting recruitment panel.  In the private sector, candidates may actually attend 3 – 5 interview with a wide variety of persons.  Whilst in the public sector there may be a level of discomfort in 1:1 interview, the concept of panels and the need for independent persons indicates that the recruitment process is actually not working in the public sector.  This surely this  is the higher order issue.

    Again, it has been my experience that some of the best recruitment has been undertaken when a peer or subordinate of the role participates in the recruitment process.  ICAC does not provide any justification how their recommendation that more senior people would add value and improve controls.  The peer or subordinate often pick up on practical experience, expertise and culture that higher level managers in an interview process may not be quite as attuned to.  It is unfortunately that ICAC is making such an unwise recommendation that is not, in my mind, good practice in recruitment.

  6. That the University of Sydney ensures the authority and responsibility of Sydney Recruitment is such that it is able to influence policy compliance at critical points in the recruitment process, and that it is held accountable for the exercise of that influence.

    Comment:  Whilst I generally agree with this recommendation, there are two challenges from this recommendation.  I would want SydneyRecruiment to monitor and report on policy compliance rather than to “influence” compliance.  It is interesting that accountability is placed on SydneyRecruitment, but not a related accountability on the recruiting business unit.Further, the report is silent on the role of the University’s Internal Audit review of recruitment process and their role in providing assurance on the compliance with the University’s policy and procedures.  Given that there has been a failure leading to an ICAC investigation, which as a significant reputational risk for the University, it would be interesting to understand where recruitment was on the University’s risk register, and the Internal Audit plan was during the period of this corrupt activity.

  7. That the University of Sydney adopts an electronic approval system as part of any major enhancement of its human resources systems.

    Comment: I think this is an excellent recommendation.  However, my experience indicates that many organisations allow this to be driven through their HR systems instead of procurement system, which splits vendor information across different system increasing the risk of vendor management and monitoring “falling between the cracks” and we end up with another ICAC investigation.  I would be recommending that the key process controls may be via HR system, but the key financial controls, approvals for contractors and consultants and vendor controls be through an electronic procurement system.

Culture

It is interesting that the recommendations are silent on organisational culture and more focused on processes.  The challenge with many organisations relate to divisional silos.

In the university sector, when it comes to procurement, this issue often becomes a greater, with procurement often seen as a “poor second cousin” that is perceived as not “understanding the unique needs of each facility”.

In addressing corruption in procurement, organisational culture is as key as process.

Summary

ICAC is a critical last line of defense to reduce corruptions in the NSW Public Sector.

As usual, the ICAC investigation is detailed and well reported.

I believe there are opportunities for better recommendations, and agencies that consider using these recommendations in their organisations should consider their wider implication and effect on effectiveness of them before proceeding.

Print Friendly

Leave a Reply

Your email address will not be published. Required fields are marked *