Fraud and corruption prevention strategy
OEH's management of risk is a crucial component of its strategic management and corporate governance framework. The agency adopts a balanced approach to its management of risk. This means that although all risks are identified and addressed, the primary focus is on controlling those activities with a high and medium risk. In addition, the resources and controls applied to address risks should be commensurate to the significance of those risks.
- Definitions of fraud and corruption
- Roles and responsibilities
- Fraud and corruption risk management
- Conflicts of interest
- Procedures for reporting fraud and corruption
- Procedures for fraud and corruption investigation
- Internal Audit Strategy
- Plan to enhance OEH's fraud and corruption controls
- Review of fraud control arrangements
- Appendix I: Examples of fraud and corruption
This Fraud and Corruption Prevention Strategy sets out the fraud and corruption prevention policies and procedures followed by the Office of Environment and Heritage (OEH). It details OEH's approach to the prevention, detection, reporting and investigation of fraud and corruption. It also identifies current activities that may be susceptible to fraud and corruption, and provides strategies for better management and control of those activities.
Effective implementation of this strategy will help ensure that public confidence in the integrity of OEH is maintained and our ability to achieve environment protection, climate change, conservation, sustainability and cultural heritage outcomes will be enhanced.
1.2 Policy and attitude to fraud and corruption
OEH promotes an organisational culture that will not tolerate any act of fraud or corruption. This Fraud and Corruption Prevention Strategy is designed to put this principle into practice.
Apart from the legal consequences of fraud and corruption, improper acts have the potential to damage OEH's public image and reputation. Unresolved allegations can also undermine an otherwise credible position and reflect negatively on innocent individuals.
All staff must be above fraud and corruption. Sanctions will apply to those who are not. In addition, staff must act so they are not perceived to be involved in such activities. Through transparent and accountable decision-making, together with open discussion by staff and managers about the risks of fraud and corruption, OEH seeks to foster an organisational climate which does not tolerate fraud or corruption.
OEH will deal fairly with all parties in the course of investigating allegations of fraud or corruption. However, if fraud or corruption is proven, OEH will apply appropriate sanctions. Possible sanctions include suspension without pay, dismissal, and loss of accumulated employer superannuation contributions. Matters referred to the Independent Commission Against Corruption (ICAC) or NSW Police may lead to criminal proceedings.
The prevention of fraud and corruption requires that all staff members act ethically and professionally in accordance with the Code of Ethical Conduct.
1.3 Relationship with other policies and plans
In addition to the Code of Ethical Conduct, this strategy has a close relationship with the following policies, plans and documents:
OEH's approach to fraud and corruption, as set out in this strategy, is designed to comply with the Auditor-General's Ten Attributes of Best Practice in Fraud Control (www.audit.nsw.gov.au) and is based on the standards, principles and strategies set out in Australian Standard AS 8001-2008 – Corporate Governance – Fraud and Corruption Control.
Fraud and corruption can be distinguished from other forms of unethical behaviour. OEH applies the following definitions which are based on those contained in the Australian Standard for Fraud and Corruption Control (AS 8001-2008).
Dishonest activity in which a director, executive, manager, employee, contractor, volunteer or work experience student acts contrary to the interests of OEH and abuses his/her position of trust in order to achieve some personal gain or advantage for him or herself or for another person or entity.
Dishonest activity, by OEH employees, contractors, volunteers, work experience students or external persons, causing actual or potential financial loss to OEH, including the theft of moneys or other property. This includes the deliberate falsification, concealment, destruction or improper use of documentation used for a normal business purpose or the improper use of other information or position.
Examples of fraud and corruption are provided in Appendix 1.
3.1 OEH Chief Executive and Executive
The Chief Executive and OEH's Executive consider and approve all policies and procedures relating to the control and investigation of fraud and corruption.
The Code of Ethical Conduct sets out the following responsibilities for the Chief Executive and the Executive:
- establishing and maintaining ethical policies, systems and procedures for all aspects of OEH work
- ensuring that staffing policies and practices are fair and equitable
- ensuring that mechanisms for responding to potentially unethical circumstances are appropriate and effective (e.g. grievance and complaint handling systems)
- ensuring that areas of work that are of inherently higher risk in terms of ethics and corruption are identified and that preventive strategies are in place
- monitoring the ethical health and culture of OEH and responding to any problems identified.
All reasonable suspicions of fraud or corruption are reported to the Chief Executive who decides what action should be initiated to assess the concerns raised. All fraud and corruption investigation reports are referred back to the Chief Executive who then decides what action is necessary to address the investigation findings.
3.2 Corporate Governance Branch
The Director Corporate Governance and staff of the Corporate Governance Branch are responsible for:
- producing fraud and corruption policies, procedures and training proposals
- liaising with internal and external investigators
- assuring the quality of investigation processes and reports, and
- providing advice to staff affected by internal investigations.
The Director Corporate Governance is also OEH's nominated Protected Disclosures Officer.
3.3 Audit and Risk Committee
OEHs independently chaired Audit and Risk Committee is responsible for overseeing the effectiveness of OEH's fraud and corruption control strategies and plans.
3.4 Senior managers
Senior managers must ensure that effective fraud and corruption prevention risk management strategies and staff awareness programs are established in their workplaces.
3.5 All managers
All OEH managers are responsible for:
- monitoring their workplaces to identify and address situations that are likely to raise ethical dilemmas (e.g. by establishing good procedural guidance for decision-making, particularly the exercise of discretion)
- ensuring that staff are not placed in potentially difficult or compromising situations (e.g. by working alone in the field where they may face compromising situations)
- being available and supportive to staff who require guidance on ethical dilemmas
- fostering a work environment free of harassment, discrimination, victimisation, corruption, maladministration and waste
- ensuring that staff are aware of the principles contained in the Code of Ethical Conduct and the established systems and procedures for addressing ethical problems
- supporting and protecting staff who report, in good faith, instances of potentially unethical or corrupt practices
- ensuring that staff are treated fairly, equitably and in accordance with legislation and policy (e.g. access to training and other development possibilities).
3.6 All OEH staff
All OEH staff have a duty to:
- act ethically, lawfully and in accordance with the principles contained in the Code of Ethical Conduct
- report potentially unethical or corrupt practices via the established mechanisms.
4.1 Regular program for fraud risk assessment
An important part of fraud and corruption prevention is understanding where the areas of risk are in relation to OEH's responsibilities and functions. OEH systemically assesses its functions and responsibilities to identify all potential risk areas and to develop a risk management plan to control high and medium risk issues. Building on this broad risk assessment, a further specific risk assessment of potential fraud and corruption issues is undertaken. A dedicated review of OEH's fraud and corruption risk assessment occurs every three years. OEH's Executive, as well as its Audit and Risk Committee, oversees this risk assessment activity.
4.2 Current fraud and corruption risk assessment
The former Department of Environment and Climate Change completed a fraud and corruption risk assessment during 2008-09. The methodology used for this assessment was based on AS/NZS 4360, the Risk Management Standard.
Overall the fraud and corruption risk assessment project concluded that the agency had in place effective controls to minimise the risk of fraud and corruption.
5.1 Conflict of interest policy
A conflict of interest exists when it is possible that a staff member could be influenced, or perceived to be influenced, by a personal interest when carrying out their duties. The Code of Ethical Conduct provides detailed guidance regarding conflicts of interest.
The community, OEH's clients, stakeholders and colleagues expect all OEH decisions to be impartial and not influenced by inappropriate considerations. It is corrupt behaviour to knowingly make a decision influenced by a conflict of interest.
5.2 Dealing with conflicts of interest
If a conflict of interest exists, could arise or could reasonably be perceived by third parties to exist, the issue should be raised in writing with the relevant manager, who must then inform the Group's or Division's Executive member. Employees and their managers have a joint responsibility to avoid or resolve conflicts of interest.
To resolve conflicts that arise, or could arise, staff, their managers and Executive members should consider the significance of the conflict and apply one of the following options:
- where the potential for conflict is minimal or can be eliminated by disclosure or effective supervision, record the details of the situation and take no further action
- dispose of the conflicting personal interest (e.g. sell the shares; give up the second job)
- do not participate in the particular task which may, or may appear to, raise a conflict of interest (e.g. we should declare our interest and not participate in any way in the selection process for a position or a tender which has attracted an application from a friend or relative)
- consider whether the conflict is significant enough to require transfer, either on a permanent or temporary basis, from the area of work where the conflict exists.
Consistent with its strong commitment to ensuring an ethical workplace, OEH has developed and published policies and processes to facilitate the reporting of suspicions of corrupt conduct, maladministration, or serious and substantial waste of public money. This guidance material helps staff make protected disclosures in accordance with the Public Interest Disclosures Act 1994. It sets out:
- procedures for making disclosures to OEH
- procedures for making disclosures to appropriate external agencies
- procedures for dealing with anonymous reports
- protection for people making protected disclosures from reprisals that might otherwise be inflicted on them because of their disclosures
- provisions for disclosures to be properly investigated and dealt with.
The protected disclosure policy and the protected disclosure reporting system complement existing communication channels between supervisors and staff. Staff are encouraged to continue to raise appropriate matters at any time with their managers, but as an alternative they have the option of making a protected disclosure.
Members of the public, clients and stakeholders can report suspicions of fraud or corruption by ringing OEH's Environment Line (131 555) or by writing to the Director Corporate Governance. Contact details are provided in the Policy and Approach for Managing External Complaints and Allegations available on OEH's website.
Anonymous reports from members of the public will be treated in accordance with the merits of the issues raised and the adequacy of the information provided.
7.1 Internal investigations
The Policy and Approach for Managing External Complaints and Allegations provides rigorous and detailed systems and procedures for conducting internal investigations and notifying appropriate external agencies.
OEH documents all processes and findings of probity investigations undertaken. These documents are managed and stored securely to protect confidentiality.
7.2 External investigative resources
OEH engages specialist external investigation and audit services to investigate probity allegations when the circumstances suggest that it is appropriate to provide an additional level of 'arms length' independence to establish the facts.
The Chief Executive has a statutory duty to report to ICAC any matters that she/he suspects, on reasonable grounds, may involve corrupt conduct, including fraud. The ICAC publication Reporting corrupt conduct to the ICAC: Guidelines for principal officers, provides more details and is available online at www.icac.nsw.gov.au.
OEH notifies NSW Police in circumstances where criminal offences are suspected. OEH is subject to the Public Finance and Audit Act 1983 and has an obligation to report certain matters of a serious nature to the Auditor-General. Matters may also be referred to the Crown Solicitor, Director of Public Prosecutions or the NSW Ombudsman. The Chief Executive determines when such referrals occur.
8.1 Internal audit capability
OEH allocates significant resources to its internal audit program to provide for in-depth auditing of functions and activities considered to be of high risk. OEH engages external service providers to conduct internal audits.
Auditable items were identified as a result of an agency-wide risk assessment process carried out by OEH. Resources are also available to conduct special audits of specific issues that may arise and require urgent examination and assessment.
8.2 Internal audit fraud control function
OEH's internal audit program includes items considered to be of high fraud and corruption risk, in particular, focusing on regulatory activities, financial transactions (including cash handling), procurement, and asset security. OEH's internal audit program is primarily 'systems-based' and, as such, identifies and tests all aspects of the controls applied to address risks in service delivery and procurement systems.
9.1 Adequacy of current fraud and corruption prevention controls
The results of the fraud and corruption risk assessment provided assurance that a high level of fraud and corruption awareness existed across the agency and that effective controls were in place in most instances to minimise identified threats and weaknesses.
9.2 Proposed actions identified by the fraud and corruption risk assessment
The Fraud and Corruption Risk Assessment document includes descriptions of controls in place to address identified risks. Where adequate controls did not exist, plans of action are noted to implement effective controls.
9.3 Management reporting of fraud and corruption control actions
OEH has developed a reporting system for senior managers to periodically report to the Executive on the management and control of those risks identified in the corporate risk register.
In addition, OEH has processes in place for senior managers to notify Corporate Governance Branch of allegations of fraud or corrupt behaviour to enable recording of allegations and assessment.
Allegations of fraud or corruption, together with actions taken are reported quarterly to the Audit and Risk Committee and six monthly to the OEH Executive.
The Fraud and Corruption Prevention Strategy will be subject to an on-going process of continuous improvement, monitoring and adjustment to ensure its viability in addressing all current fraud and corruption issues.
All required actions, resulting from the fraud and corruption risk assessment, will be reviewed to ensure they have been effectively implemented. Senior management will be required to regularly report on the controls they manage to reduce the possibility of fraud and corruption. A new fraud and corruption risk assessment will be undertaken every three years.
The following list is not exhaustive but includes some of the more common examples of fraud and corruption in the public sector:
Theft of assets, such as:
- Consumables or supplies
Unauthorised or illegal use of assets, information or services for private purposes, including:
- Computers, including email and the Internet
- Motor vehicles
- Clerical and other support
- Confidential information
- Equipment, including photocopiers, telephones and fax machines
- The OEH name or logo e.g. through use of letterhead or staff authority/access card
Abuse of position and power for personal gain, such as:
- Seeking and obtaining bribes or other gifts in exchange for favourable treatment
- Nepotism in staff appointments
Manipulation and misuse of account payments, such as:
- Fictitious employees on the payroll
- Ordering equipment for private and personal use
- Favouring suppliers whose costs are not as competitive as other suppliers
Falsification of records, including:
- Travel claims
- Purchase orders
- Petty cash vouchers.
Manipulation of computer programs for improper purposes, such as:
- Unauthorised approval to pay
- Diversion of proceeds
- Writing off debts.
Page last updated: 21 June 2011