ICAC Bytes

Welcome to the inaugural edition of ICAC Bytes, a publication devoted to ICAC matters and public integrity generally. ICAC Bytes will be published and distributed on a bi-monthly basis. As the name suggests, it intends to provide you with information to raise your awareness of issues and will act as a continuing education tool.

ICAC Bytes aims to keep readers up-to-date with developments in South Australia’s new public integrity regime. Not only will ICAC Bytes consider the role and functions of the Independent Commissioner Against Corruption (ICAC) and the Office for Public Integrity (OPI), it will also examine other elements of the regime which are of particular relevance for local government, such as the new functions and powers of the Ombudsman and the Auditor-General.

Additionally, ICAC Bytes will look beyond South Australia to inform readers of important interstate experiences. A national perspective will provide insight into the corruption, misconduct and maladministration risks that face local government and how South Australia’s ICAC and other authorities might go about investigating and addressing them.

SA lands its first Independent Commissioner against corruption

Early yesterday morning, Premier Jay Weatherill and Attorney-General & Deputy Premier John Rau announced that the Honourable Bruce Lander will be appointed as South Australia’s first Independent Commissioner Against Corruption.

Justice Lander has a wealth of experience to undertake the role of Commissioner. Justice Lander has been a Judge of the Federal Court of Australia since July 2003. Prior to this, Justice Lander was a Judge of the Supreme Court of South Australia. He also held positions as a Judge in the Supreme Court of the Australian Capital Territory and the Supreme Court of Norfolk Island, and is a Presidential Member of the Administrative Appeals Tribunal.

The appointment of Justice Lander takes us one step closer to the commencement of an ICAC investigation.

The Independent Commissioner Against Corruption Act 2012 — where is it at?

The Independent Commissioner Against Corruption Bill 2012 (the ICAC Bill) was passed by State Parliament on 28 November 2012, after protracted debate and delay. The Bill received Royal Assent from the Governor on 6 December 2012, and on that day became the Independent Commissioner Against Corruption Act 2012 (SA) (the ICAC Act).

Despite Royal Assent, most of the ICAC Act is yet to commence. The sections of the ICAC Act which establish the ICAC and the OPI have not commenced, nor have those parts which amend ‘other Acts’ of relevance to local government such as the Local Government Act 1999 (SA), the Ombudsman Act 1972 (SA) and the Public Finance and Audit Act 1987 (SA). The only parts that have commenced are formal provisions and amendments to other Acts which do not have any impact on local government.

In effect, therefore, the ICAC Act is sitting dormant with no legal force. Now that a Commissioner has been appointed we believe that there will be moves to acquire an office for the ICAC and to commence certain provisions of the ICAC Act. The Attorney-General has advised of his expectation that the legislation will be up and running by mid 2013.

What is happening interstate? - Another interesting investigation from NSW

Late last year, the ICAC of NSW released a report in which findings of corruption were made against 22 employees from 14 NSW Councils, one employee of the NSW Roads and Traffic Authority, three suppliers and 15 staff from four supply companies.

The NSW ICAC uncovered a widespread practice of local government employees accepting secret gifts which ‘far exceeded any reasonable concept of token value’ from suppliers in exchange for continuing to place orders with those suppliers. The investigation found that gifts had been offered by suppliers to 110 public authorities (88 of which being councils) and that gifts were in fact provided to employees at the majority of these public authorities. However, due to time and resource pressures the ICAC only focused its investigation on 15 public authorities.

In addition to discovering this extensive, systemic acceptance of inappropriate gifts, the NSW ICAC exposed invoicing schemes through which a council employee at one council received over $300,000, while another council received over $23,000 in kickbacks from several suppliers for the issuing of false invoices to the councils. Evidence put before the NSW ICAC suggested that the schemes may have cost the two councils a combined value of over $1.5 million.

The NSW ICAC made 15 anti-corruption recommendations, all of which were directed at local government. Recommendations included reviewing gifts and benefits policies, communicating behavioural expectations to suppliers, prohibiting council employees with financial delegations from receiving gifts of any kind, training relevant staff members to identify and resist ‘relational’ sales tactics, and improving procurement and stocktaking procedures. Furthermore, the NSW ICAC has been conducting talks with Councils across NSW to more directly communicate the messages and lessons from the investigation.

Guest Author

Each edition of the ICAC Bytes will feature an article by a guest author aimed at conveying lessons or wisdom from the ‘front lines’ of local government. In this edition, Brian Carr is our guest author.

Brian Carr, is the Chief Executive Officer of Light Regional Council. Brian boasts an impressive professional career in local government, performing roles in both South Australia and interstate.

Having worked in jurisdictions subject to an ICAC regime, Brian has had significant experience managing day-to-day council operations through the good, the bad and the ugly.

The ICAC Act contains significant penalties for disclosing information concerning an ICAC investigation including the identity of complainants and witnesses. Further examinations are to be conducted in private. This is an important point of distinction between the South Australian (SA) ICAC and the NSW ICAC. However, the SA ICAC may make public statements in connection with a particular matter if he considers it appropriate to do so in the public interest. Further where the ICAC conducts an evaluation of a council's (or other public authority or other inquiry agency) practices, policies and procedures, he may conduct a public inquiry.

In this article, Brian draws upon his experience with the operation of ICAC interstate to offer advice to CEOs where a council is the subject of an ICAC public inquiry into the council’s practices, policies or procedures.

Dealing with an absolute power from the CEO’s perspective

Through my work in a jurisdiction where an ICAC was in place, I quickly learned the necessity of always being ready for an ICAC inquiry. Now that it has come to South Australia, I am ever mindful of the almost limitless power the ICAC possesses and what that could mean for my Council.

Where the ICAC conducts a public inquiry into the practices, policies or procedures of the Council strategies need to be develop to manage the risks.

Managing the risk relies on the appreciation of the consequences that can result from such an inquiry. End game, minimise the impact on Council.

Those strategic risks that I have identified are:

• Political
• Reputational
• Financial
• Legal
• Operational
• Technical

For instance, the political environment may well become emotionally charged.  Such an environment requires strong leadership from the CEO in order to manage these emotions so that cool, calm and effective decisions are made.

The mind races to damage limitation, usually in anticipation of someone’s apparently clear cut reputation being put on the line. The question has to be asked, “whose reputation is at stake?”

The answer to this question is not straight-forward and, more often than not, involves multiple parties and multiple courses of action from the elected body to the CEO and everyone else in between. Quite often there is an obvious lack of communication that has occurred or, worse still, an invalid or loose process that results in less than best practice. Worst case scenario is that the ‘break-down’ in systems is considered to be systemic by the community.

Irrespective of who may be at fault public messages and communications need to be carefully managed by the CEO and the Principal Member.

The role played by digital media cannot be underestimated. Nothing sells a newspaper like scandal. The council will have to deal with rough press, vicious media coverage and, of course, the (unrestrained) social media outlets, so often used by the community (anonymously), all of which can have disastrous consequences for everyone involved. The primary concern for councils should be to minimise the sometimes irreversible damage inflicted on the reputations of innocent parties, who get caught up in the matter.

It must be made clear who is a person ‘of interest’ and who is merely ‘assisting the enquiry’ by giving evidence to the investigator or examiner appointed by the ICAC. There is a significant difference in the approach taken by an examiner or investigator depending on the classification. The person assisting the inquiry will be treated with some degree of leniency. It is important to ensure persons assisting an inquiry are not tarred by the same brush as those in the limelight.

The financial risks become quickly apparent as resources are expended to respond to the unyielding requests and demands placed on the council. This also has the effect of distracting the organisation from its core business: providing for the community.

Inevitably, the council’s legal budget gets a work over. Whilst the ICAC has its own in-house legal counsel, it goes without saying that every party involved in the investigation will retain, to some degree, solicitors to assist them in the process. Prevention is better than cure. Ensure that your staff and elected members are trained and aware of Council’s policies concerning corruption prevention is essential.

Operational pressures mount as an investigation or inquiry progresses. Elected members and staff alike become distracted from their assigned tasks and stress builds to varying degrees. Elected Members will focus their attention on the council’s policies, procedures and guidelines, which has the effect of further diminishing the delivery of services to the community.

The CEO’s ability to quell emotions, calm the waters and help people (staff and elected members) to maintain a sense of reality and perspective so the investigation and inquiry can be dealt with expeditiously cannot be underestimated.

In certain instances the CEO may even need to turn his/her mind to engaging an organisational psychologist specialising in such areas.

Hunters by stealth

The entry of ICAC into your organisation is overnight, but their exit is quite protracted, so the quicker you get them out the better! Work with the investigators etc, not against them.
The technical risks usually revolve around a comprehensive, almost forensic assessment of the systems and processes to ascertain whether the alleged breaches can be overcome in the future.

Remembering that an ICAC investigation is about identifying and investigating corruption within the public sector system, it is important to scrutinise councils’ existing policy and procedures and have clear lines of delegation and responsibility assigned to all staff members and keep the Elected Members updated in relation to council business and how it is transacted.

In conclusion, do your utmost to avoid an ICAC investigation or attracting the adverse attention of the ICAC as the financial, psychological, political, reputational, legal, operational and technical impacts are punishingly severe, both mentally and financially.

It should be recalled that the Former NSW Premier Nick Greiner, who introduced an ICAC into New South Wales, was its first casualty based on a finding concerning recruitment favours. ICAC bites.

Biography

Brian is an experienced Chief Executive Officer having held that role over a period of 30 years at the following Councils:

2007 – current  Light Regional Council
1996 – 2003:   Liverpool City Council, NSW
1992 – 1996:   City of Tea Tree Gully, SA
1989 – 1992:   City of Elizabeth, SA
1982 – 1989:  District Council of Wakefield Plains, SA

He is a strategic leader, renowned for rebuilding organisations and resolving complex issues and holds a reputation for applying a visionary approach to achieve the aspirations of Council and its community.

Well known for his “can-do” attitude, balancing economic, environmental and social outcomes with an inclusive management style.