Regulation involves the enforcement of government controls and restrictions on a particular activity conducted by the public sector.
In NSW, state and local governments regulate many activities including the health and safety of workplaces, environmental management, construction and property development, motor vehicles, and food, as well as licensing of occupations and skills.
The integrity of regulatory functions is a matter of public interest. The power of regulators to grant significant benefits to, or impose restrictions or penalties on, members of the public can increase the risk that they will be exposed to corruption. Regulators also have a role in collecting and protecting government revenue.
The improper performance of regulatory functions can constitute corrupt conduct as defined in the Independent Commission Against Corruption Act 1988.
A risk assessment of the regulatory functions of a public sector agency is likely to identify some or all of the following corruption risks:
A public official may:
- fail to declare a conflict of interest but continue to deal with a close associate in exercising their regulatory functions
- solicit or accept a bribe in order to exercise, or not exercise, their regulatory powers in a certain way
- improperly provide confidential information to a person outside the agency
A person dealing with a public sector regulatory agency may:
- improperly seek the assistance of a public official on a particular regulatory matter
- offer a bribe to a public official as an inducement to exercise, or not exercise, their regulatory powers in a certain way
- present false information or documents.
Managing corruption risks
As a minimum your agency should:
- Introduce policy and procedures for regulatory functions that contain elements listed in the Policy Development Module.
- Include in the policy sanctions for any breach of the policy and procedures.
- Review the policy every two years.
- Train all relevant employees in the policy and procedures to ensure they are aware of their accountabilities. Include regulatory functions as a risk to be assessed in the agency's internal audit and corruption risk management processes.
- Refer to regulatory functions in relevant corporate documents such as codes of conduct.
Risk management strategies
Following your risk assessment of regulatory functions you should consider these risk management strategies:
- Ensuring employees who are involved in regulatory work understand their roles and responsibilities (for example, through methods such as induction, formal training, on-the-job training, supervision, policies and publications).
- Communicating with the public about what they can expect from the agency when it exercises its regulatory functions, the standards that apply and the rights and responsibilities of those regulated. (This can be through documents such as the agency's statement of business ethics, its client service charter and information brochures.)
- Maintaining regular contact between regulators and their supervisors while the regulator is conducting fieldwork.
- Managers/supervisors accompanying regulatory team members on fieldwork on a random, unscheduled basis without prior notification.
- Reviewing and approving final documentation by supervisors.
- Conducting regular reviews of completed matters to test compliance with record keeping requirements, consistency of decision-making and management of conflicts of interest.
- Holding periodic formal work reviews of regulatory employees.
- Segregating regulatory work from the role of allocating regulatory work.
- Working in pairs when employees are conducting fieldwork.
- Scheduling inspections so regulators cannot choose the inspection targets and dates.
- Managing instances where regulators have a private interest which may conflict with their regulatory duties.
- Prohibiting employees from engaging in any secondary employment which would conflict with their regulatory role.
- Ensuring that computerised systems reflect actual decision-making protocols so that employees cannot close a matter or change allocated tasks on the computer system without authority.
|Case study 1|
An ICAC inquiry found that a personal relationship between a hotel proprietor and a senior departmental inspector created a conflict of interests that resulted in the inspector acting corruptly.
|Case study 2|
In 2006/2007, the Commission investigated allegations that a team leader at a local council had solicited and received cash and sexual services from brothel owners and prostitutes, in exchange for not taking action to prevent unauthorised use of premises for prostitution. The Commission found that the employee had engaged in corrupt conduct.
Frequently asked questions
What is a regulator?
The term "regulator" is used here to include public officials who assess applications, or perform inspectorial, investigative or other compliance functions. It can also refer to private sector individuals and organisations that are contracted by government to perform regulatory functions such as approvals. For example, local councils engage structural engineers to certify building structures; state utilities may outsource inspectorial functions; local councils may outsource health inspections. All contract regulators working for the public sector at the state or local government level are "public officials" for the purposes of the Independent Commission Against Corruption Act 1988.
What issues should be considered in a corruption risk assessment of regulatory functions?
Regulatory functions should automatically be identified as high-risk areas and any risk assessment should include:
How can my agency manage corruption risks when our regulators are contractors?
When outsourcing regulatory functions:
How can an agency support regulators who may be exposed to corruption?
Because some regulators work alone and often have direct contact with those they inspect or investigate, they can be placed in difficult positions. Agencies should not assume that their employees would know how to resolve ethical problems without practical support and guidance. All employees should be told to refuse any corrupt offers they receive in the course of their work and to report all such incidents as soon as practicable.
A practical preventative approach is to conduct a community awareness campaign that explains what the public can expect when dealing with the agency including:
- Administering regulation, Australian National Audit Office, ACT, March 2007, March 2007
- From red tape to Results - Government Regulation, a guide to best practice, NSW Department of Premier and Cabinet, Sydney, June 1997.
Relevant ICAC investigation reports
- Roads and Traffic Authority - corrupt conduct in issuing of driver licences (Operation Sirona) (September 2007)
- Parramatta City Council - corrupt conduct associated with regulation of brothels (Operation Pelion) (August 2007)
- Crime and Corruption Commission (Queensland), www.ccc.qld.gov.au
- Australian National Audit Office, www.anao.gov.au
- NSW Department of Premier and Cabinet, www.dpc.nsw.gov.au