Академический Документы
Профессиональный Документы
Культура Документы
December 1996
This publication is available in other formats for the vision impaired upon request. Please advise of format needed, for example large print or as an ASCII file. This publication is available on the ICAC website in HTML format. www.icac.nsw.gov.au
ISBN 0 7310 7272 3 December 1996 Copyright in this work is held by the Independent Commission Against Corruption. Division 3 of the Commonwealth Copyright Act 1968 recognises that limited further use of this material can occur for the purposes of fair dealing, for example; study, research or criticism etc. However, if you wish to make use of this material other than as permitted by the Copyright Act 1968, please write to the Commission at GPO Box 500, Sydney NSW 2001. This report and further information about the Independent Commission Against Corruption can be found on the Commissions website at www.icac.nsw.gov.au
CONTENTS
CHAPTER 1 -INTRODUCTION CHAPTER 2-WHAT IS A PROBITY AUDITOR? CHAPTER 3-LIMITING THE USE OF PROBITY AUDITORS 3.1 Reasons given for using a probity auditor CHAPTER 4-DECIDING TO USE A PROBITY AUDITOR 4.1 Criteria for use 5.1 Testing the market 5.2 Terms of reference 5.3 Selecting a probity auditor CHAPTER 6-SCOPE OF WORK CHAPTER 7-WHAT HAPPENS IF A PROBITY AUDITOR CRITICISES A PROCESS OR DECISION? CHAPTER 8-PROBITY PRINCIPLES 8.1 Best Value for Public Money 8.2 Impartiality and Fairness 8.3 Deal with Conflicts of Interest 8.4 Accountability CHAPTER 9-CONCLUSION BIBLIOGRAPHY ACKNOWLEDGMENTS 3 4 5 5 8 8 9 9 10 11 13 14 14 15 15 15 17 18 19
CHAPTER 1 -INTRODUCTION
In recent years there has been an increased focus on the issue of probity in the NSW public sector. This has been prompted by many factors including the exposure of corrupt or unethical practices and the move towards more open and accountable government . Organisations such as the Auditor- General, Ombudsman and the Independent Commission Against Corruption (ICAC) have also increased the focus on the need for probity in the public sector. In addition, the community is now better informed about government and its operations. The public sector is expected to be able to demonstrate that best value for money is being achieved when public money is being spent. The processes used by the public sector must be fair and impartial and best practice methods must be followed to ensure efficiency and effectiveness. NSW public sector agencies are required to follow rigorous policies and procedures for processes such as procurement, disposal of assets and contracting out. They are required to develop and implement Fraud Control Strategies to minimise the risk of fraud and corruption. The Ombudsman, Auditor-General and the ICAC play an important role in ensuring that allegations of improper conduct are investigated. These requirements have placed additional responsibilities on public sector agencies to act with integrity and to have probity as a prime consideration in all projects.
Calls for a greater degree of probity should not result in the unnecessary growth of a new consultancy industry in probity auditing. It is inappropriate for public funds to be spent on private consultants such as probity auditors every time a public sector agency is involved in what it sees as a difficult project. Public sector agencies should already have the skills or access to appropriate resources to ensure probity, both within the agency or elsewhere in the public sector. There is a risk that by using probity auditors agencies will fall to develop appropriate internal standards of probity or foster internal expertise. Instead, agencies may rely on 'contracting in' such expertise.
the complexity (size and cost) of the project requires outside assistance it provides reassurance to the community and those wishing to do business with the public sector that the outcome can be trusted having a probity auditor helps to avoid problems they provide an objective, independent view on the probity of the process it minimises the potential for litigation These reasons are discussed in more detail below.
The complexity (size and cost) of the project requires outside assistance Complexity alone is not sufficient justification to use a probity auditor. Agencies should be capable of carrying out their charter even if it involves, for example, the development of major infrastructure projects. If agencies believe that they do not have the resources or skills to undertake such projects, they should first seek technical advice. Agencies should consider other solutions to ensure probity by calling on the expertise of other public sector agencies. The NSW Treasury, Audit Office, Premier's Department, and Department of Public Works and Services are available to provide advice and assistance to public sector agencies. Furthermore, as part of its corruption prevention function the ICAC provides free advice to public sector organisations on the probity considerations of any project. If organisations are unsure how to proceed, or are planning a complex or controversial project, they should consult with the Commission early in the process to identify and deal with any possible concerns regarding probity. This is reinforced by the Premier's Memorandum 93-34, which encourages agencies to approach the ICAC for advice at an early stage on major development proposals. To provide reassurance to the community and those wishing to do business with the public sector that they can trust the outcome It is emphasised that probity must be an integral part of any process and not be a last minute consideration. Agencies should have in place systems, policies and procedures that can withstand public scrutiny and are consistent with existing government policy. Public sector agencies should ideally have their own internal standards of probity and not have to rely on 'contracting in' such expertise. Consequently, agencies must ensure that their staff are familiar with probity issues and are sufficiently trained in NSW government policies and procedures. Agencies should also have a corruption prevention plan in place aimed at minimising the risk of corruption and promoting probity. The ICAC has encountered some organisations using a probity auditor as @insurance'. This can be an excuse for poor management practices. A probity auditor is just one option that management can use to help them with their responsibilities. To this end, a probity auditor provides management with advice, evaluation, recommendations and information concerning the activities they have been required to review. Using a probity auditor can never absolve management from their responsibilities regarding probity. A probity auditor helps to avoid problems Probity auditors are no guarantee that problems will not occur. In some instances, the inappropriate use of probity auditors has actually created problems.
To provide an objective, independent view on the probity of the process Probity auditors are generally paid for their services by the public sector agency which employs them. This relationship can create the appearance of divided loyalties, real or otherwise. This financial relationship raises questions regarding the probity auditor's independence. The ICAC has found examples of where a probity auditor has been reluctant to recommend to agencies that they abandon or recommence a process that has 'gone wrong' or could be subject to criticism. This may be the result of the probity auditor having more loyalty towards the agency than to the need for probity. A solution to this situation may be the establishment of a panel of vetted probity auditors, currently being considered by the Department of Public Works and Services. Accessing probity auditors from a central pool can help to keep the engaging agency at arm's length and to avoid capture. Another option which agencies should consider before seeking outside assistance is to appoint an internal probity auditor to oversee large or complex projects. For example, an agency could select someone from within the public sector, whether from within their own organisation or from another public sector agency, whose job it is to oversee probity matters for a particular project. To minimise the potential for litigation Probity auditors should not be used to transfer risk from the public sector agency to someone else. Management is still accountable for the decisions they make. Probity auditors should not be seen as a way of avoiding litigation by disgruntled bidders at the expense of having sound processes.
1. The integrity of the project may be questioned. 2. There has been a history of controversy, litigation (for example, in the past an
unsuccessful bidder has sued and now wants to be considered). lease of public assets to the private sector).
3. The project is politically sensitive and vulnerable to controversy (for example, 4. It is anticipated that there may be an in-house bid and independent scrutiny is
essential to avoid the perception of bias and favouritism.
5. There are high stakes involved for bidders (for example, bidders are required to
outlay substantial resources and costs to prepare and submit a bid).
7. The project is very complex, such as build, own, operate, transfer (BOO/BOOT)
1. Establish the probity auditor's role within the process. 2. Define the scope of the audit. 3. Authorise full and free access to records, personnel, meetings and premises. The
probity auditor must also have the prerogative to take notes from, and make copies of, documents relevant to the probity audit. of the contract.
4. State the probity auditor's fees, reporting time lines, and expected completion date 5. Specify the reporting relationships.
NB. The terms of reference should state to whom in the agency the probity auditor is required to report. This may include an appropriate delegated officer or the project manager. It is important, however, that the probity auditor also has direct access to the Chief Executive Officer, the Minister if relevant, investigative bodies such as the ICAC, Ombudsman, and Audit Office, particularly if they perceive that the process being followed is not proper.
6. Define the ownership of the probity auditor's working papers and all supporting
material related to the probity audit.
Probity auditing: When, why and how ICAC 9
7. Specify what arrangements will be made to retain the probity auditor's material
during and after the audit and how it will be secured.
Independence and Objectivity be objective and independent of the agency's activities. This independence permits probity auditors to perform their work objectively and allows them to give unbiased judgements. They independent of all organisations who are potential bidders and are being for the project. Without independence, the work of the probity compromised. freely and should be considered auditor is
Professional Competence and Due Care be able to demonstrate due professional care and diligence when performing audits. Probity auditors should exercise reasonable skill, care and judgment in performing their duties.
Integrity be of good character and have high ethical and moral principles that are supported by personal and professional referees. Organisations can request performance evaluations of any previous audits or similar work that the person(s) may have undertaken as evidence of their expertise and ability.
Confidentiality understand that the process may involve politically and commercially sensitive matters and be able to maintain confidentiality of information. They must be willing to sign a confidentiality agreement as one of the terms of their contract.
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b. Scrutinise the process to determine whether relevant government guidelines and appropriate policies are being followed and that best practice has been followed. c. Ensure that the process has been impartial and fair with no party being given advantage over another or unfairly discriminated against.
d. Provide information to those wishing to do business with the organisation on the probity of the process. e. f. g. Ensure that all relevant participants in the process are aware of their responsibilities to disclose conflicts of interest. Observe debriefing sessions with bidders. Review and assess all relevant documentation to ensure accountability (for example, cheek that decisions have been recorded, and any departures from established procedures have been approved). Identify Whether the process has been applied consistently according to the preestablished evaluation model. advise on the management t of probity issues that may arise Conduct a risk assessment and identify possible probity issues that may arise before the process commences (for more detailed information on risk assessment, refer to the ICAC's publication Practical Guide to Corruption Prevention: Module 2-Corruption Risk Assessment and Management). Provide advice to the organisation and interested parties on how emerging issues can be resolved or managed (for example, conflicts of interest). However, it must be emphasised that the probity auditor is not part of the decision making process.
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k.
l.
Assist with improving the level of decision making if the circumstances warrant this.
m. Observe and document the process followed and document and report any probity issues that may arise. n. Liaise with other agencies if appropriate (for example, Treasury, ICAC, Premier's Department). documentation and reporting to the organisation
o. Obtain, analyse, interpret and document information to support the outcomes of the audit. p. Submit reports to management based on predetermined contract milestones, or as requested, or when considered necessary, to provide a record of the process confirming that probity has been observed. q. Document matters, obtain sufficient and appropriate information to support any conclusions on which reports are based, and identify any areas where information has been withheld by the organisation. r. Prepare a signed, written final report describing the organisation's performance when conducting the process. The report should present the purpose, scope and results of the probity audit and include an expression of the probity auditor's opinion. Reports should highlight significant findings and recommendations and inform management of any major deviation from the approved process and the reason for those deviations.
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ICAC publications Pitfalls or Probity Contracting for Services: The Probity Perspective Practical Guide to Corruption Prevention (Module 12 -Purchasing).
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8.4 Accountability
Public sector agencies should have appropriate mechanisms in place to show that they are accountable for their practices and the decisions that are made. Accountability requirements can reduce opportunities for corruption and save time, money, resources and problems in the long term. Mechanisms can include the agency keeping detailed records throughout the process such as minutes of meetings, the reasoning behind any decisions made, who made those decisions and any departure from established procedures being approved by senior staff not directly involved in the process. Maintaining detailed records can be a way of proving that the process followed was
Probity auditing: When, why and how ICAC 15
legitimate if any questions or complaints are raised later. Probity auditors should review an agency's accountability requirements and advise on what mechanisms are appropriate. Public sector agencies may sometimes wish to ask only one firm or person to bid or negotiate directly with a firm. This may arise for example, if there is only one supplier, or there are concerns regarding intellectual property over an innovative idea. To satisfy probity requirements in these cases, the probity auditor should scrutinise the negotiation process to determine whether the organisation can show that the outcome reflects good value and impartiality. The NSW Government Procurement and Disposal Guidelines, and the ICAC publication Practical Guide to Corruption Prevention (Module 12Purchasing) should be consulted in these instances as they provide more detail on how these issues should be managed. The reasons for the action taken should be fully documented.
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CHAPTER 9-CONCLUSION
It is not possible for this document to cover every possible scenario or dilemma that may arise when using a probity auditor. However, the options raised and the issues canvassed can be adapted for use by individual agencies to fit the circumstances of their particular project. They are not intended to be used as a rigid set of rules and are intended to complement other existing guidelines and procedures and agencies' good management practices. If agencies have questions or issues regarding probity and/or the use of probity auditors not covered in this material, advice is available from the Corruption Prevention Section of the ICAC by contacting the Corruption Prevention Duty Officer on (02) 9318 5999.
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BIBLIOGRAPHY
NSW Independent Commission Against Corruption publications:
1. Pitfalls or Probity, Tendering & Purchasing Case Studies, ICAC, June 1993 2. Contracting for Services: The Probity Perspective, ICAG, May 1995 3. Practical Guide to Corruption Prevention, ICAC, March 1996
NSW Government Guidelines, Policies, Codes, Manuals and Regulations:
5. Procurement and Disposal Guidelines: A guide to inviting, assessing and selecting 6. Capital Project Procurement Manual, NSW Construction Policy Steering Committee,
1993-Available from the NSW Department of Public Works and Services. 1996
7. Guidelines for the Engagement and Use of Consultants, NSW Premier's Department, 8. Competitive Tendering and Contracting Out Guidelines, NSW
Department, 1992 1992 Premier's
9. Total Assets Management Manual, NSW Department of Public Works and Services, 10. Public Sector Management (Stores and Services) Regulation 1988 11. Infrastructure Partnership Implementation Guidelines, NSW Department of Public
Works and Services, January 1996
12. Code of Practice for the Construction Industry and Code of Tendering for the
Construction Industry, NSW Construction Policy Steering Committee, July 1996Available from the NSW Department of Public Works and Services. 1996
13. Guidelines for the Engagement and Use of Consultants, NSW Premier's Department, 14. Service Competition Policy, NSW Premier's Department, 1995
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ACKNOWLEDGMENTS
Project Manager Leigh Elliott Project Team Chris Leeds Tiffany Blackett Vic Baueris Anita Hansen ICAC Internal Review Margaret Brodie Roy Waldon Robert Lang External Review John Eden, NSW Department of Public Works Glen Monkton, NSW Department of Public Works Rory O'Connor, Institute of Internal Auditors Australia John Howard and Theo Vermeulen, Public Employment Office Malcolm Richardson, Premier's Department Christine Lithgow, Roads and Traffic Authority Stephen Horne, The Audit Office John Koutsis, Railway Services Authority of NSW
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