Reports
Engagement of probity advisers and probity auditors
Three key agencies are not fully complying with the NSW Procurement Board’s Direction for engaging probity practitioners, according to a report released today by the Acting Auditor-General for New South Wales, Ian Goodwin. They also do not have effective processes to achieve compliance or assure that probity engagements achieved value for money.
Probity is defined as the quality of having strong moral principles, honesty and decency. Probity is important for NSW Government agencies as it helps ensure decisions are made with integrity, fairness and accountability, while attaining value for money.
Probity advisers provide guidance on issues concerning integrity, fairness and accountability that may arise throughout asset procurement and disposal processes. Probity auditors verify that agencies' processes are consistent with government laws and legislation, guidelines and best practice principles.
According to the NSW State Infrastructure Strategy 2018-2038, New South Wales has more infrastructure projects underway than any state or territory in Australia. The scale of the spend on procuring and constructing new public transport networks, roads, schools and hospitals, the complexity of these projects and public scrutiny of aspects of their delivery has increased the focus on probity in the public sector.
A Procurement Board Direction, 'PBD-2013-05 Engagement of probity advisers and probity auditors' (the Direction), sets out the requirements for NSW Government agencies' use and engagement of probity practitioners. It confirms agencies should routinely take into account probity considerations in their procurement. The Direction also specifies that NSW Government agencies can use probity advisers and probity auditors (probity practitioners) when making decisions on procuring and disposing of assets, but that agencies:
- should use external probity practitioners as the exception rather than the rule
- should not use external probity practitioners as an 'insurance policy'
- must be accountable for decisions made
- cannot substitute the use of probity practitioners for good management practices
- not engage the same probity practitioner on an ongoing basis, and ensure the relationship remains robustly independent.
The scale of probity spend may be small in the context of the NSW Government's spend on projects. However, government agencies remain responsible for probity considerations whether they engage external probity practitioners or not.
The audit assessed whether Transport for NSW, the Department of Education and the Ministry of Health:
- complied with the requirements of ‘PBD-2013-05 Engagement of Probity Advisers and Probity Auditors’
- effectively ensured they achieved value for money when they used probity practitioners.
These entities are referred to as 'participating agencies' in this report.
We also surveyed 40 NSW Government agencies with the largest total expenditures (top 40 agencies) to get a cross sector view of their use of probity practitioners. These agencies are listed in Appendix two.
Conclusion
We found instances where each of the three participating agencies had not fully complied with the requirements of the NSW Procurement Board Direction ‘PBD-2013-05 Engagement of Probity Advisers and Probity Auditors’ when they engaged probity practitioners. We also found they did not have effective processes to achieve compliance or assure the engagements achieved value for money.
In the sample of engagements we selected, we found instances where the participating agencies did not always:
- document detailed terms of reference
- ensure the practitioner was sufficiently independent
- manage probity practitioners' independence and conflict of interest issues transparently
- provide practitioners with full access to records, people and meetings
- establish independent reporting lines reporting was limited to project managers
- evaluate whether value for money was achieved.
We also found:
- agencies tend to rely on only a limited number of probity service providers, sometimes using them on a continuous basis, which may threaten the actual or perceived independence of probity practitioners
- the NSW Procurement Board does not effectively monitor agencies' compliance with the Direction's requirements. Our enquiries revealed that the Board has not asked any agency to report on its use of probity practitioners since the Direction's inception in 2013.
There are no professional standards and capability requirements for probity practitioners
NSW Government agencies use probity practitioners to independently verify that their procurement and asset disposal processes are transparent, fair and accountable in the pursuit of value for money.
Probity practitioners are not subject to regulations that require them to have professional qualifications, experience and capability. Government agencies in New South Wales have difficulty finding probity standards, regulations or best practice guides to reference, which may diminish the degree of reliance stakeholders can place on practitioners’ work.
The NSW Procurement Board provides direction for the use of probity practitioners
The NSW Procurement Board Direction 'PBD-2013-15 for engagement of probity advisers and probity auditors' outlines the requirements for agencies' use of probity practitioners in the New South Wales public sector. All NSW Government agencies, except local government, state owned corporations and universities, must comply with the Direction when engaging probity practitioners. This is illustrated in Exhibit 1 below.
Procurement and reporting of consultancy services
NSW Government agencies engage consultants to provide professional advice to inform their decision‑making. The spend on consultants is measured and reported in different ways for different purposes and the absence of a consistently applied definition makes quantification difficult.
The NSW Government’s procurement principles aim to help agencies obtain value for money and be fair, ethical and transparent in their procurement activities. All NSW Government agencies, with the exception of State Owned Corporations, must comply with the NSW Procurement Board’s Direction when engaging suppliers of business advisory services. Business advisory services include consultancy services. NSW Government agencies must disclose certain information about their use of consultants in their annual reports. The table below illustrates the detailed procurement and reporting requirements.
| Relevant guidance | Requirements | |
|---|---|---|
| Procurement of consultancy services | PBD 2015 04 Engagement of major suppliers of consultancy and other services (the Direction) including the Standard Commercial Framework (revised on 31 January 2018, shortly before it was superseded by 'PBD 2018 01') |
Required agencies to seek the Agency Head or Chief Financial Officer's approval for engagements over $50,000 and report the engagements in the Major Suppliers' Portal (the Portal). |
| PBD 2018 01 Engagement of professional services suppliers (replaced 'PBD 2015 04' in May 2018) |
Requires agencies to seek the Agency Head or Chief Financial Officer's approval for engagements that depart from the Standard Commercial Framework and report the engagements in the Portal. Exhibit 3 in the report includes the key requirements of these three Directions. |
|
| Reporting of consultancy expenditure | Annual Reports (Departments) Regulation 2015 and Annual Reports (Statutory Bodies) Regulation 2015 | Requires agencies to disclose, in their annual reports, details of consultants engaged in a reporting year. |
| Premier's Memorandum 'M2002 07 Engagement and Use of Consultants' |
Outlines additional reporting requirements for agencies to describe the nature and purpose of consultancies in their annual reports. |
We examined how 12 agencies complied with their procurement and reporting obligations for consultancy services between 1 July 2016 and 31 March 2018. Participating agencies are listed in Appendix two. We also examined how NSW Procurement supports the functions of the NSW Procurement Board within the Department of Finance, Services and Innovation.
This audit assessed:
- agency compliance with relevant procurement requirements for their use of consultants
- agency compliance with disclosure requirements about consultancy expenditure in their annual reports
- the effectiveness of the NSW Procurement Board (the Board) in fulfilling its functions to oversee and support agency procurement of consultancy services.
