Effective internal reporting systems are essential to facilitate the making of public interest disclosures by staff and the protection of those who have made such disclosures.1
An effective internal reporting process provides an agency with a valuable source of information about corrupt conduct and other misconduct. A 2006 report2 on occupational fraud found that the most common method of detecting fraud was by a tip (34.2%). The majority of tips (64.1%) were received from employees. Agencies that had fraud hotlines or other anonymous reporting mechanisms at the time the frauds occurred had a median loss of $100,000 per fraud and detected the fraud within 15 months of inception. By contrast, agencies without hotlines suffered twice the median loss ($200,000) and took 24 months to detect the frauds.
Why should your agency have an internal reporting system?
To facilitate public interest disclosures
The Public Interest Disclosures Act 1994 (the PID Act) provides public officials with a number of ways to make disclosures including reporting disclosures to an officer of a public authority "in accordance with any procedure established by the authority concerned for the reporting of allegations of corrupt conduct, maladministration, serious and substantial waste of public money or government information contravention by the authority or any of its officers".3 The PID Act requires government agencies to have a policy that provides for its procedures for receiving, assessing and dealing with public interest disclosures.
To facilitate reporting to the ICAC
Under section 11 of the Independent Commission Against Corruption Act 1988 (the ICAC Act), a principal officer of a NSW public authority has a duty to report to the Commission any matter where there is a reasonable suspicion that corrupt conduct has occurred or may occur. A minister of the NSW Government is required to report suspected corrupt conduct to either the ICAC or to the head of an agency for which he or she is responsible.
To support good governance and organisational improvement
A good internal reporting system is an important source of information for an agency. It will enable appropriate people within an agency to receive and act upon reports of corruption, maladministration and serious and substantial waste and implement continuous organisational improvement. To be effective, an internal reporting system must also address the attitudes which deter staff from reporting corrupt conduct. A workplace culture needs to be established in which integrity is encouraged and reports of corruption are acted upon. Effective reporting channels will be of little value if people do not believe there is any point in using them or fear reprisals if they do.
|Case study 1: Using internal reporting to detect corruption|
An ICAC investigation looked into the activity of the RTA's Registry Services Manager (RSM) at the Botany Motor Registry. The ICAC found that the RSM had received cash payments and other inducements, such as cannabis, as part of a scheme in which he collaborated with a driving instructor and a restaurant owner to unlawfully help applicants to obtain driver licenses.
At least several of the staff at Botany Registry reported to the ICAC that they were aware that the RSM was providing extraordinary assistance to applicants in a number of ways over a considerable period, although all but one denied knowledge that he was acting corruptly. Only one staff member ever raised his concerns about the RSM's behaviour with an RTA senior manager, the Registry Services Operations Manager (RSOM).
The RSOM recalled that the staff member told him that he had some information regarding allegations that the RSM was "corrupt or was on the take or something". He advised the staff member that he should either provide evidence to the RSOM who would refer it on to the RTA's investigation area, contact the RTA ethics hotline or take the matter directly to the ICAC. The staff member did not take the matter further because he had concerns about RTA management maintaining confidentiality.
Although the RSOM had received an allegation that an RTA manager was corrupt, he did not report the matter up the chain himself or take any steps to have it investigated. This is because he did not take the report seriously as he believed it was made as "payback" for disciplinary action that the RSM had taken against the officer making the internal report.
The RTA's policy and procedure did not provide any specific guidance on managing disclosures that may initially appear malicious. However, the procedure did state that officers who receive a disclosure, either verbally or in writing, were obliged to assess the disclosure impartially. The RSOM who received this report admitted that he was not sufficiently familiar with the contents of the RTA's internal reporting policy.
In response, the ICAC recommended that the RTA make its disclosures policy consistent with the NSW Ombudsman guidelines and train staff who are authorised to receive internal reports about corrupt conduct in the RTA policy and the NSW Ombudsman's guidelines.
Frequently asked questions
What should we do if allegations are made about the head of the agency?
Make sure that your internal reporting policy provides an alternative channel for confidential internal reporting of allegations about the CEO or a disclosure coordinator. It is important that these alternatives are aware of their responsibilities even if they are not called upon to exercise them very often.
Agencies that are spread over a wide geographical area may be able to use reporting resources in another branch of the agency as each regional office should have appointed someone with responsibility for receiving and dealing with disclosures.
If no alternative internal reporting channel is available, allegations can be reported directly to the ICAC. Protections are available under the ICAC Act.
How should the agency deal with frivolous or vexatious allegations?
It is often difficult to establish whether allegations are vexatious until at least some enquiries have been made.
The NSW Ombudsman's Public Interest Disclosure Guidelines note that disclosures motivated by malice or disgruntlement can be the only way some corrupt conduct or criminality is brought to light. Determining the motive an internal reporter is particularly difficult. For this reason, the Ombudsman advises that "when assessing a report it is therefore generally best - at least initially - to focus solely on its content and accuracy, not the possible motives of the reporter". However, "if the actual content of the report is frivolous, the PID Act will not apply because it only applies to reports about serious matters".
Should we ignore anonymous allegations?
Like allegations that seem frivolous, anonymous allegations are often treated less seriously than others. However just because information is provided anonymously does not mean it is not accurate. Anonymous allegations should be assessed on their merits like any other report.
The real disadvantage of reports made anonymously is that they cannot be checked with the source if more information is needed to conduct an investigation.
How can we make sure confidentiality of the information is maintained?
Agencies must make sure that confidentiality is maintained unless it is unreasonable or impossible to do so. However an assurance of complete and absolute confidentiality cannot and should not be given. Sometimes, for example, it may be necessary to reveal the source of a report to the person who is the subject of the report in order to investigate the matter fully or for reasons of natural justice and it is important that staff understand this.
Standard security measures for electronic and hard copy files can be used to protect information. Managers and others who may receive allegations should be made aware of the confidentiality requirements. The agency's code of conduct should include information about the internal reporting system, the need for confidentiality and the consequences of taking detrimental action against people who report.
Documents relating to a public interest disclosure cannot be released under a Government Information (Public Access) Act 2009 request.
Publications – internal reporting
- Public Interest Disclosures Act 1994 (NSW)
- Public Interest Disclosures Guidelines, NSW Ombudsman, Sydney, April 2009.
- Office of the NSW Ombudsman, www.ombo.nsw.gov.au
- Department of Premier and Cabinet, www.dpc.nsw.gov.au
- NSW legislation, www.legislation.nsw.gov.au
Relevant topics on the ICAC website
1. Public Interest Disclosures Guidelines, NSW Ombudsman.
2. Report to the Nation on Occupational Fraud and Abuse, Association of Certified Fraud Examiners, 2006.
3. Section 8(1)(c) of the Public Interest Disclosures Act 1994.