Attribute 6: Fraud Reporting Systems

The Need for Effective Fraud Reporting

Efforts to increase fraud awareness amongst employees and customers need to be supported by appropriate fraud reporting systems. Potential complainants may feel inhibited and uncomfortable about making reports where there is no obvious means to do so.

Such arrangements were either not in operation or could be improved in 20% of agencies surveyed.

Fraud reporting systems are essential. Without a ready avenue fraud is unlikely to be reported.

Factors to Consider for Fraud Reporting

Documenting and distributing appropriate arrangements minimises uncertainty and clarifies the responsibilities of employees. Staff must be clear on the procedures to follow so they do not waste their time and the agency's resources.

Care should be taken in the design of fraud reporting systems. Organisation size and structure factors will influence arrangements required; particularly factors such as numbers of operational units, levels of hierarchy and geographic spread of the agency.

Secondly, there are a range of factors which have been identified by the ICAC as impediments to effective fraud reporting:

• cultural antipathy to "dobbing in your workmates".
• immediate supervisor's possible involvement or association with those involved.
• disinclination to report if past experience has shown that "nothing happens" and/or that those who report receive negative treatment, for example being labelled as "troublemakers" (discussed at attribute no. 7).
• insulation of the principal officer and senior management from junior employees.
• lack of clear and appropriate rules for referral and/or action where corrupt conduct is suspected.

In addition, agencies should also consider how best to deal with aspects such as:

• low employee awareness of reporting processes and procedures.
• potential for an implied association, even if quite innocent, with those involved (i.e. guilt by association).
• a tendency (which may exist at all levels) to accept long-standing practices; even those which clearly involve or encourage/assist improper practices.

Developing Fraud Reporting Systems

There are many different possible fraud reporting arrangements which could be adopted. An ICAC publication entitled Effective Reporting of Corrupt Conduct within Government Departments and Agencies provides a useful guide in this regard. The original 1990 version has been included in full at Appendix 5. A revised version may be issued by the ICAC during 1994.

The following suggestions have been extracted from the ICAC Guide for consideration when constructing a fraud reporting system:

• in small agencies, direct reporting to the principal officer may be appropriate. In large or decentralised agencies, a system of direct reporting to the principal officer may make excessive demands upon his or her time. Where the principal officer does not have regular operational contact with most sectors of the agency, full and timely reporting may also be inhibited.
• where reporting is not to be direct to the principal officer, a senior manager with ready access to the principal officer should be nominated.
• the principal officer must make appropriate arrangements to receive timely briefings inclusive of a written summary from the nominated senior manager.
• complaints or reports by current employees should generally be made to the employee's immediate supervisor. Supervisors in turn report the matter immediately to the nominated senior management. Complainants should be encouraged to provide a written summary of the complaints.
• employees may have legitimate fears about reporting to an immediate supervisor, even where the complaint does not involve the supervisor. Therefore, there must be an alternate channel for confidential reporting direct to the nominated senior manager or where the report involves the nominated senior manager, to the principal officer.
• employees should be encouraged not to make complaints anonymously. The most effective encouragement is likely to be an accurate perception by employees that confidentiality will be maintained.
• employees should be advised that a complaint of corrupt conduct may be made directly to the Commission where the employee does not wish to report the matter to their immediate supervisor, the nominated senior manager or the principal officer.
• it is important that complainants recognise that their complaints have been considered and that appropriate action has been taken. Complainants should be advised of the eventual outcome in all cases.
• a concise, accurate and readable summary of fraud reporting arrangements should be prepared and distributed to all employees and should be regularly publicised for example on noticeboards and in internal newsletters. Perceptions by employees that they may be prejudiced in their employment or otherwise by making genuine complaints or reports should be countered by emphasising the confidential treatment these will receive and the agency's determination to minimise corrupt conduct. The summary should also contain a positive anti-corruption theme relevant to the agency.

All categories of potential complainants should be considered in developing an agency's policy in this area and in designing a suitable fraud reporting system. For example, agencies should consider the most effective manner for receiving and dealing with fraud related complaints and reports from both customers and private citizens generally.

Have officers or positions authorised to receive reports of fraud been clearly designated? Do these nominees appear to be appropriate given the agency's structure, the nature of its business, customers and employees? Have procedures to report fraud been documented and distributed in an appropriate manner to reach all employees and other potential sources of fraud reports?

Illustration courtesy of the Roads and Traffic Authority