VENDORiQ: ICAC Reveals New Corruption Scandal
2 November 2021: Two former Western Sydney TAFE (WSI TAFE) executives have been charged by the NSW Independent Commission Against Corruption (ICAC) for allegedly engaging in illegal solicitation and acceptance of $450,000 from IT consultancy firm Oscillosoft. The three-year investigation published its findings in a public report that revealed how the executives failed to comply with the proper IT procurement processes when they acquired the iPlan software program on behalf of the institute.
Why it’s Important.
IT-related fraud and corruption have grabbed the headlines in the past years, including:
- the payment of false invoices in 2015 by a former IT manager who worked at several Australian universities
- the 2016 corruption investigation involving $1.7 million in payments for the personal business of an ICT manager at TAFE NSW South Western Sydney Institute
- the 2012 illegal ICT contractor recruitment by the head of ICT projects at The University of Sydney
- and just recently in 2020, the Australian National Audit Office (ANAO) investigated fraud allegations concerning $2.8 billion worth of procurement contracts by government agencies made with IBM.
While these headline grabbing examples are concerning, the reality is questionable contracting and programming in ICT is far more pervasive than most executives would like to admit.
IBRS has seen multiple examples of this problem.
Sometimes these have been uncovered as part of ‘project rescue’ engagements where IBRS has been asked to review why a project is failing and recommend remediation. This is the worst time to discover that the consulting services being procured are more or less thin air, as it means significant budget has already been spent. In one case, IBRS identified a project to implement a major information system had burnt through $3.5 million over three years without a single delivery milestone being met and no code being available for review. There was a ‘friendship’ between the contracting company and the ICT executive.
In another case, IBRS uncovered consulting being awarded to a family member of the person granting the contracts, and the organisation had an ‘over-reliance’ on contracting.
Neither of these situations may warrant a corruption investigation. Though they certainly skirted the edges of the law.
At other times, IBRS has uncovered questionable contracting and procurement as part of project assurance reviews. This is the best time to reveal problematic procurement, since it occurs earlier in the project cycle and thus heads off significant losses. More importantly, when staff know that such activities are likely to be exposed as part of the regular due diligence of project assurance, the temptation to engage in such activities that just barely skirt corruption is far less likely to occur.
There is a great deal of financial and reputational savings to be accomplished by putting appropriate governance, such as formal gateway reviews and project assurance programs, in place.
That said, not every project needs a top-down approach to procurement. Still, the industry needs a more careful process of choosing the right level of governance and assurance for the right projects, taking into consideration the context and culture of each organisation.
- Procurement teams
- Executive board
For fraud and corruption to be prevented, better oversight by an institution's board should be extended to overriding controls, reviewing financial transactions and reporting processes, coupled with a program of project assurance.
Internal controls in payroll, procurement, inventory, sales and financial reporting must be proactive to prevent the manipulation of processes.
Finally, organisations must review procurement processes regularly and amend sections that promote poor supervision and weak adherence to routine audits.
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