Corruption prevention in the University sector Friday 25 th June 2004 Australia New Zealand Internal Audit Group – Annual Conference

Overview About the ICAC Protected Disclosures “Degrees of Risk” ICAC data ICAC investigations The Public – Private Interface Probity Auditing The Sarbanes-Oxley Act What can Internal Audit do ? Contacting the ICAC

About the ICAC What we do: investigate and prevent corruption in the NSW public sector help build and sustain integrity in the public sector ‘public sector’ includes NSW universities What we don’t do: maladministration serious and substantial waste

ICAC powers The ICAC can: use advanced and covert investigative resources use coercive powers hold private or public hearings publish a report make findings about public officials and elected members make recommendations (prosecution, disciplinary, preventative) monitor those recommendations The trade off is: we cannot prosecute

How we learn about corruption Principal officer must report any matter suspected on reasonable grounds that concerns or may concern corrupt conduct (s.11) – eg. Glen Oakley investigation Protected Disclosure (s.10) General complaint from public (s.10) ICAC’s own initiative Cooperation with other watchdog agencies

What is a Protected Disclosure? Covered by Protected Disclosures Act (1994) – aka Whistleblowers leg’n Must be made to CEO, authorised manager or investigative authority Must be voluntary & in good faith Act specifies penalties for recriminations & harassment including fines and prison

Corruption risks in universities “Degrees of Risk”- August 2002 University staff as ‘public officials’ Culture of academic freedom New cost / revenue drivers Policy & reporting framework not enforced Poor record keeping No understanding of ‘conflict of interest’ Interface with private sector

Source: ICAC

ICAC Data – Umbrella report Identified Risks Fraud / Forgery Misuse / theft of resources Misuse of travel claims Emerging Risks Electronic Fraud / Corruption Increase in Commercial Activity Identified Strengths Audit Encourages reporting corruption Code of Conduct Committed / Ethical Staff

ICAC investigations Altered student records – UTS (Aug.02) Forged qualifications – Oakley (Dec. 03) Bribery, travel & credit card rorts, nepotism, undeclared consultancies, fabricated documents Australian Museum - > 2,000 stolen specimens (97-02) Parliamentary Library – disposal of collections

Public – Private Interface Cost & revenue drivers Emphasis on applied research (vs curiosity / pure) Partnerships, sponsorships, spin off companies & their distance from IA Commercial-in-Confidence problems Academics as ‘entrepreneurs’ not ‘public officials’ Universities as developers

Probity Auditing What is it ? ICAC research When to do it External vs Internal probity oversight Probity Plans Real time auditing ?

Probity Audit / Plan examples Research Joint ventures / Spin Offs Commissioned research Sponsorships, Secondments Venture capitalism Non-Research Building & Construction Disposal of land & assets Accessing private finance IT acquisitions

Sarbanes–Oxley Act 2002 Separating auditing and non-auditing functions Making audit c’ttee responsible for protected disclosures Mandatory fraud reporting to audit c’ttee Falsifying records – 20 years imprisonment Implications for Australia ?

What can IA do ? Get involved in ‘probity auditing’ Facilitate protected disclosures Cherry-pick the SOX Act Reduce dependence on IA Use enforcement for prevention Share intelligence & prevent forum shopping

ICAC contact details Ph: Toll free: PO Box 500, Sydney