Fraud and Corruption Control Framework

July 2015


Contents

Introduction

Definitions

Corruption

Fraud

Misconduct

Policy Scope

Policy Statement

Fraud and Corruption Control

1.Planning and resourcing

Roles and responsibilities

2.Prevention

3.Detection

Observation and awareness by all employees

Risk Management System

Internal audit

External audit

Mechanisms for reporting

Public Interest Disclosure (Whistle-Blower Protection)

4.Response

Responding to Fraud and Corruption Incidents

Preliminary Assessment

Investigations

Disciplinary Procedures

External Reporting requirements

Recovery and Legal Proceedings

Insurance

Staff communication, education and awareness

Monitor, Review and Evaluation

Performance indicators

Stakeholders, Client and Community Awareness

References

Accountability Framework

Policies and procedures

Legislation

Across government requirements

Introduction

The Department of Local Government and Communities (hereinafter referred to as the Department) is committed to ensuring it promotes a high standard of integrity and accountability by:

  • demonstrating professional behaviour consistent with our role and values, and
  • operating in an environment of openness, probity and accountability in all aspects of its operations.

The purpose of this Fraud and Corruption Control Framework (hereinafter referred to as the Framework) is to provide direction on the strategies adopted by the Department for implementing and monitoring fraud and corruption prevention, detection and response initiatives and activities.

The Framework has been developed referencing the Australian Standard AS8001-2008 Fraud and Corruption Control and forms an integral part of the Department’s Risk Management Framework.

Definitions

Corruption

Corruption is defined by Australian Standard AS8001 – 2008 as:

“Corruption is dishonest activity in which an employee or contractor of the Department acts contrary to the interests of the Department and abuses their position of trust in order to achieve some personal gain or advantage for themselves or for another person or organisation. The concept of ‘corruption’ can also involve corrupt conduct by the Department, or a person purporting to act on behalf of and in the interests of the Department, in order to secure some form of improper advantage for the Department.”

Corruption is any deliberate or intentional wrongdoing that is improper, dishonest or fraudulent and may include:

  • conflict of interest;
  • failure to disclose acceptance of gifts or hospitality;
  • acceptance of a bribe;
  • misuse of internet or email; or
  • release of confidential or private information or intellectual property.

Corrupt conduct tends to show a deliberate intent or an improper purpose and motivation and may involve conduct such as the deliberate failure to perform the functions of office properly; the exercise of a power or duty for an improper purpose; or dishonesty.

Fraud

Fraud is defined by Australian Standard AS8001 – 2008 as:

“Dishonest activity causing actual or potential financial loss to any person or entity including theft of monies or other property by employees or persons external to the entity and where deception is used at the time, immediately before or immediately following the activity.”

This also includes the deliberate falsification, concealment, destruction or use of falsified documentation used or intended for use for a normal business purpose or the improper use of information or position for personal financial benefit.

The theft of property belonging to an entity by a person or persons internal to the entity by where deception is not used is also considered ‘fraud’ for the purposes of this Standard.

Note: the concept of fraud within the meaning of the standard can involve fraudulent or corrupt conduct by internal or external parties targeting the entity or fraudulent or corrupt conduct by the entity itself targeting external parties.

Fraud can take many forms including:

  • the misappropriation of assets;
  • the manipulation of financial reporting (either internal or external to the Department); and
  • corruption involving abuse of position for personal gain.

Misconduct

Serious misconduct as defined by the Corruption, Crime and Misconduct Act 2003 is when a public officer:

  • acts corruptly or corruptly fails to act in the course of their duties; or
  • corruptly takes advantage of their position for the benefit or detriment of any person; or
  • commits an offence which carries a penalty of two or more year’s imprisonment.

Minor misconduct as defined by section 4(d) of the Corruption, Crime and Misconduct Act 2003 occurs if a public officer engages in conduct that:

  • adversely affects , or could adversely affect, directly or indirectly, the honest or impartial performance of the functions of a public authority or public officer, whether or not the public officer was acting in their public officer capacity at the time of engaging in the conduct; or
  • constitutes or involves the performance of his or her functions in a manner that is not honest or impartial; or
  • constitutes or involves a breach of trust placed in the public officer by reason of his or her office or employment as a public officer; or
  • involves the misuse of information or material that the public officer has acquired is in connection with his or her functions as the public officer, whether the misuse is for the benefit of the public officer or the benefit or detriment of another person

and constitutes, or could constitute;

  • a disciplinary offence providing reasonable grounds for termination of a person’s office or employment as a public service officer under the Public Sector Management Act 1994 (whether or not the public officer to whom the allegation relates is a public service officer or is a person whose office or employment could be terminated on the grounds of such conduct).

Policy Scope

This document applies to:

  • all employees whether by way of appointment, secondment, contract, temporary arrangement or volunteering, work experience, trainees and interns; and
  • any external party involved in providing goods or services, with or without receipt of payment, to the Department, such as contractors, consultants, outsourced service providers and suppliers.

Policy Statement

The Department is committed to an organisational culture that promotes a high standard of integrity and accountability by demonstrating professional behaviours that are consistent with our role and values and provides clear direction in supporting an effective risk management strategy, including fraud and corruption risk.

The Department has zero tolerance to fraudulent and corrupt conduct.

All employees have a key responsibility to safeguard against damage and loss through fraud, corruption or misconduct. All employees have an obligation to support efforts to reduce associated risk by behaving with integrity and professionalism in undertaking their duties.

Where employees detect suspected or actual fraud and corruption they have a responsibility to take all necessary steps to report such conduct as required under the Department of Local Government and CommunitiesCode of Conduct, relevant statutes, instructions and standards.

Suspected fraud or corruption will be reported, investigated and resolved in accordance with internal policies and relevant legislation. All legal obligations to the principles of procedural fairness and natural justice will be met.

Fraud and Corruption Control

Fraud and corruption control requires the implementation of a number of key strategies which contribute to an effective control framework:

1.Planning and resourcing

The Framework is an integral part of the Department’s overall risk management system and details its approach to fraud and corruption prevention, detection, response and monitoring and evaluation initiatives.

The Framework will be monitored regularly by the Audit and Risk Management Committee and reviewed every two years, or as considered necessary, taking into account any changes to the Department’s business and operating environment, including the impact of fraud and corruption risks.

Roles and responsibilities

Director General
  • Legislated responsibility to exercise authority on behalf of the Department.
  • Overall accountability for prevention and detection of fraud and corruption within the Department.
  • Ensure integrity and accountability in the performance of the Department’s functions.
  • Manage the Department’s operations and resources ensuring service delivery is effective and efficient.
  • Promote continual evaluation and improvement of the Department’s management practices.
Executive Director Corporate Services
  • Delegated authority for fraud and corruption control and acts as ‘sponsor’ of the risk management process, including fraud and corruption.
  • Chair of the Audit and Risk Management Committee.
  • Oversee the development, implementation and continued management of the fraud and corruption control plan.
  • Provide accurate and timely advice to the Director General, Audit and Risk Management Committee and Ethics and Accountability Committee on fraud and corruption matters.
  • Promote the implementation of effective risk management practices, in relation to fraud and corruption.
  • Ensure training and awareness programs are comprehensive and designed to assist employees, contractors and stakeholders to identify, prevent and detect fraud and corruption, including methods of reporting.
Audit and Risk Management Committee
  • Oversight of risk management, including fraud and corruption control.
  • Provide advice to the Director General, including potential fraud and corruption matters and recommendations.
  • Review governance processes to ensure all matters relating to alleged fraud and corruption or unethical conduct are dealt with appropriately.
  • Review the Department’s Risk Management Framework for identifying, monitoring and managing business risk, including risks associated with fraud and corruption.
  • Review the Strategic Internal Audit Plan annually to ensure it covers fraud and corruption risks.
Senior Management Commitment
  • Encourage and maintaina culture and working environment that fosters personal responsibility, integrity and accountability.
  • Develop and maintain best practice for the prevention and detection of fraud and corruption and ensuring due consideration is given to confidentiality, natural justice and procedural fairness pertaining to any reported incidents.
Corporate Strategy, Planning and Governance
  • Develop, implement and monitor the fraud and corruption control plan in consultation with divisional business areas.
  • Coordinate, monitor and review the fraud and corruption risk assessment process.
  • Implement fraud and corruption strategies with divisional business areas, including internal and external audit recommendations.
  • Record and collate fraud and corruption incident reports.
  • Coordinate investigations into allegations of fraud and corruption.
  • Provide reports to the Audit and Risk Management Committee on fraud and corruption as necessary.
Employees
  • Understand responsibilities associated with performing their official duties and commit to acting ethically and with integrity in accordance with the Department’s Code of Conduct and other relevant policies and procedures.
  • Contribute to the development of improved systems, policies and procedures to enhance the Department’s prevention of fraud and corruption.
  • Undertake awareness training and education.
  • Report all suspected or actual incidents of fraud and corruption that they may be aware of to an appropriate officer being:
  • Line Manager
  • Director
  • Executive Director
  • Executive Director Corporate Services
  • Director General

Alternatively, employees can make a Public Interest Disclosure under the Public Interest Disclosure Act 2003.

Further information can be obtained from the Department’s Public Interest Disclosure Guidelines or the Public Sector Commission’s website.

  • Provide any necessary information and cooperation in the conduct of any such assessment or investigation in relation to an incident.
External parties or contractors

All external parties or contractors who become aware of any suspected fraud and or corruption within the Department should contact the Director General or the Corruption and Crime Commission with relevant information.

Internal Audit Activity in the control of fraud and corruption

Internal audit activity has been demonstrated to be an effective mechanism in the prevention and detection of fraud and corruption by ensuring due adherence to internal control systems.

The Department has contracted an independent internal auditor under Common Use Agreement 23706.

2.Prevention

Robust internal controls and systems are a prime defence mechanism against fraud and corruption. The Department demonstrates these by:

  • Adopting and encouraging a workplace culture based on the Western Australian Public Sector Code of Ethics and the general principles of official conduct prescribed by the Public Sector Management Act 1994.
  • Endorsing a workplace Code of Conduct which reinforces a commitment to promoting a high standard of integrity and accountability by demonstrating professional behaviours that are consistent with the Department’s role and values. The Code of Conduct (Principle 3) covers fraud and corruption.
  • A commitment from senior management to be role models and demonstrate ethical and accountable behaviour by their actions.
  • Establishing a strategic Ethics and Accountability Committee responsible for identifying and implementing strategies to develop and maintain a strong culture of professionalism, ethics, accountability and intolerance of breaches of conduct.
  • Ensuring all employees participate in and complete the mandatory Induction Program and Accountability and Ethical Decision Making Training.
  • Involving employees in the Performance Development Program, a process which provides clarity to employees about what is expected of their behaviour and work performance, required outcomes, and how they contribute to the team and departmental strategies.
  • Ensuring effective management of conflict of interests as per the Department’s Conflict of Interest Guidelines.
  • Establishing effective reporting mechanisms and protection for employees making disclosures about fraud and corruption activities. The Department has published Public Interest Disclosure Guidelines to document this process.
  • Promoting, practising and adhering to risk management policies and procedures, ensuring risk assessments are conducted and treatment plans developed to address identified risks as required.
  • Pre-employment screening to verify qualifications, suitability and experience of a potential candidate for employment. Techniques used can include confirmation of qualifications, verification of employment background, referee and criminal history checks.
  • Supplier and customer screening to verify credentials.
  • Contracts entered into by the Department for goods and services that are relatively low risk and value are awarded either through the Department of Finance Whole of Government Common Use Arrangement or, if outside a Common Use Arrangement, are contracted in accordance with the State Supply Commission Supply Policies. All preferred providers under the Common Use Arrangement have undergone stringent assessment.
  • Funding and grants contracts entered into by the Department are subject to rigorous screening and assessment processes.
  • Concessions, rebates, benefits provided by the Department are subject to rigorous screening and assessment processes.

3.Detection

The Department has the following measures in place to identify and detect incidents of fraud and/or corruption:

Observation and awareness by all employees

Through the Department’s Code of Conduct and Accountable and Ethical Decision Making training, staff have knowledge and understanding of how to respond if fraud and corrupt activity is detected or suspected. Detection of fraud or corruption often requires specialised and knowledge of the business area where the activity may be perpetrated. However the presence of indicators of fraud does not necessarily mean that fraud is occurring; they may be the result of other factors.

Risk Management System

The Department has a Risk Management system in place for the identification, analysis, evaluation and treatment of risk, including fraud and corruption, and a process to monitor and review on a regular basis.

The application of risk management principles and techniques in the assessment of the risk of fraud and corruption must be carried out within the Risk Management Framework as adopted by the Department.

Internal audit

Internal Auditing is an independent evaluation and assurance activity that assists the Department to improve the effectiveness of its risk management, control and governance processes.

The Department’s internal audit function is currently outsourced to SR Governance (Common Use Arrangement 23706), who operates in accordance with the Institute of Internal Auditors’ Standard. Two officers from this organisation attend meetings of the Audit and Risk Management Committee providing advice and guidance as well as findings and recommendations associated with audits conducted in line with the Strategic Internal Audit Plan.

External audit

External auditors are responsible for planning and performing an audit to obtain reasonable assurance that the Department’s financial statements are free of material misstatement, whether caused by fraud or error.

The ‘Australian Auditing Standard ASA 240 – The Auditor’s Responsibilities Relating to Fraud in an Audit of a Financial Report’ details the external auditor’s responsibilities in relation to fraud and ensuring an attitude of professional scepticism is maintained throughout the audit, considering the potential for management override of controls and recognising the fact that audit procedures that are effective for detecting error may not be effective in detecting fraud.

The Department’s Audit and Risk Management Committee has a representative officer from the Office of the Auditor General, as an observer to comment and offer guidance, as required.

Mechanisms for reporting

It is mandatory to report known or suspected fraud and/or corruption through one or more of the channels outlined below:

  • Reporting should, in the first instance, be to an officer’s immediate manager, or the next level senior officer if more appropriate.
  • However, an officer may feel more comfortable reporting their suspicions to the Executive Director Corporate Services or a Public Interest Disclosure Officer, as identified on the Department’s intranet.
  • Staff may also report directly to the Corruption and Crime Commission if desired. The Corruption and Crime Commission does not require callers to provide their personal details or reveal their identity, but anonymous reports are difficult to assess and will be treated with scepticism until supporting evidence is gained through a preliminary independent investigation.

Public Interest Disclosure (Whistle-Blower Protection)

The Public Interest Disclosure Act 2003 facilitates the disclosure of public interest information, enabling anyone to make disclosures about improper or unlawful conduct within the State Public Sector, local government and public universities without fear of reprisal. The Public Interest Disclosure Act 2003 also provides protection for those who are the subject of a disclosure.