In September 2017, the Independent Board-based Anti-corruption Commission (IBAC) released their Working with Integrity: The Department of Education and Training’s second report to the Independent Board-based Anti-corruption Commission (the Report). The Report made a series of recommendations based on the findings of two operations investigating corruption within the Victorian Department of Education and Training (DET) and government schools. Operation Ord and Operation Dunham identified systemic failings which were exploited by a few senior employees within the DET. The corrupt activities involved false invoices and unscrupulous procurement practices. Interestingly, this is the only case of corruption within an Australian Education Department that has officially gone to an independent corruption commission or has been reported in Australia. Although this case involves a government education department, these compliance failures in the education sector provide valuable lessons which relate to the non-government school sector.
Operation Ord
Operation Ord focussed on allegations that senior officials misappropriated funds from the DET budget by inflating or falsifying invoices and other financial documents to misappropriate funds for their own personal gain. The misappropriated funds were used on inappropriate expenses such as excessive hospitality, travel and personal expenses. Operation Ord’s recommendations are currently being implemented by the DET.
Operation Dunham
Operation Dunham, similar to Operation Ord, tells a tale of a prevailing culture of non-compliance among some of the most senior DET officers, contributing to misconduct and hindering opportunities to expose and address misconduct. Operation Dunham exposed improper action and behaviour of senior staff which corrupted the procurement process for a major IT project, the Ultranet. The Ultranet project, which was intended to be a streamlined IT system for Victorian government schools, cost an estimated $240 million and was dumped in 2013 after ongoing technical issues throughout its implementation. Some of the improper actions included the receipt of gifts, travel, improper communications intended to influence the tender process and a likely attempt to influence the tender evaluation outcome by inserting like-minded people into the assessment team. Operation Dunham’s final report will be released in March 2018. Refer to our previous article on the Ultranet scandal.
Why was the IBAC involved?
In June 2017, Nino Napoli, a former director of the DET, as well as another four accomplices one of whom is a former primary school principal, faced charges for allegedly defrauding government schools of $6 million dollars. The IBAC said that some charges relate to dishonesty, providing falsified information, dealing with proceeds of crime, conspiracy to pervert the course of justice, conspiracy to defraud and conspiracy to deal with proceeds of crime.
Following many IBAC hearings, Napoli admitted that he and his associates funnelled millions of dollars of public school funding through an intricate web of companies owned and run by his relatives between 2007 and 2014 while he was the DET director of school resources.
The Findings
The main findings from both Operations Ord and Dunham were that the DET had:
- a culture of non-compliance, bullying and self-entitlement
- a lack of accountability
- inadequate controls around procurement, governance and risk and major projects
- poor financial management controls in the DET and in government schools
- incompatible financial systems and auditing measures.
The effect of these failures led to corruption and now, public scandal.
The IBAC Recommendations
The IBAC recommended several measures be put in place to improve the culture and compliance within the DET. IBAC's recommendations include:
- ensuring employees understand the public sector values, code of conduct and DET policies
- leadership must set the tone for the top down compliance culture
- implement a whistleblower and complaints culture
- financial management, procurement and compliance controls need to be established
- employment policies and practices, including exclusion and disciplinary processes
- audit and risk management.
This 'to do list' is a road map of sorts of how to avoid corrupt practices occurring in your school!
The three lines of defence
In response to the IBAC’s findings and recommendations, the DET has started the Integrity Reform Program (IRP). The IRP is said to go beyond preventing corruption; to embed a healthy, high-performing and ethical culture within the DET corporate workplaces and schools.
The DET’s IRP is divided into three lines of defence:
- First line - implement a culture of integrity to underpin everything the DET does
- Second line – smart system and controls to oversee and guide actions of staff
- Third line – independent and robust assurance.
These three lines of defence will supposedly create a top down culture of accountability and responsibility within the DET, so integrity can be upheld in government education. This will eventuate from concentrating on leaders and senior staff modelling the values and expectations of the organisation. For the DET, this means focussing on the integrity to help uphold and maintain ethical standards to meet the evolving and dynamic education needs of Victorians.
Whistleblower protections and Complaints Management
What Operations Ord and Dunham discovered through their investigations is that employees did not speak up about suspicious or unusual activity for fear of reprisal because they did not understand their obligations as public service employees. IBAC recommended that internal whistle-blowing and complaints management programs be established.
To encourage employees to raise concerns about fraud and corruption, the DET established the Speak Up hotline, hosted by an independent third party, to implement an open whistleblower culture and complaints management program. These ethical decision-making models and training offer support for school leaders. For more information on whistleblowing, please refer to these recent School Governance Articles:
What are the lessons?
For non-government schools, there are a few messages which should resonate. Non-government schools should have appropriate controls and measures in place to ensure compliance with their legal requirements and minimise the risk of any inappropriate conduct occurring. Schools should consider reviewing or even implementing some of the IBAC recommendations such as:
- evidence-based procurement policies and procedures
- resources for ethical decision-making by school staff
- the enforcement of travel policies
- implementing a gifts, benefits and hospitality policy and register
- creating a conflict of interest policy and register.
The move towards tighter not for profit requirements by state and territory departments in school registration legislation is already prompting non-government schools to adopt similar practices.
