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How To Report Corruption In Local Government
If youve ever had the opportunity to visit Chicago, Illinois, youre sure to have heard someone refer to this major city as the Windy City. What you may be interested to know is that Chicago didnt get its nickname from the gusty winds that blow across the city from Lake Michigan. In fact, Chicago is only the 12th-windiest city in the nation among major cities. According to the Chicago Tribune, the most likely source of the nickname dates back to the 1800s and originates from long-winded politicians.
The University of Illinois found that the northern district of Illinois had 1,642 corruption convictions between 1976 and 2013. The tradition of corruption continues, as four of the last seven Illinois governors have served time in federal prison for corruption.
Election time is prime time for long-winded speeches at every level of government. Citizens want to believe that their candidates motives are genuine and that their tax dollars will be used ethically to support and improve their community. How can you tell if corruption exists, and if it does, do you know how to report corruption in local government?
Agencies And Their Responsibilities
The Constitution of Victoria recognises local government as a separate tier of government. Residents and ratepayers elect councillors to govern councils, and the councillors appoint a CEO, who manages the council’s operations. While administered under the Act, all 79 councils in Victoria operate autonomously and are accountable to ratepayers and residents.
The local government sector is primarily funded though rates and charges, as well as government grants, to deliver services to the local community. In the 201718 financial year, our financial audit found that Victorian councils recorded revenue of $10.7 billion. Rates and charges revenue was $5.7 billion, making up over 50 per cent of total revenue. The second-largest revenue stream for councils was government grants and contributions, totalling $3.15 billion.
Figure 1C shows the populations in the audited councils’ municipalities and the audited councils’ incomes for 201718.
Figure 1CAudited councils’ populations and incomes for 201718
VAGO, based on council annual reports for 201718.
Local Government Inspectorate
LGI is the dedicated integrity agency for local government in Victoria. LGI investigates offences under the Act and monitors governance and compliance with the Act in Victorian councils.
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What Is Fraud And Corruption
Fraud is dishonest activity involving deception that causes actual or potential financial loss. Examples of fraud include:
- theft of money or property
- falsely claiming to hold qualifications
- false invoicing for goods or services not delivered, or inflating the value of goods and services
- theft of intellectual property or confidential information
- falsifying an entity’s financial statements to obtain an improper or financial benefit
- misuse of position to gain financial advantage.
Corruption is dishonest activity in which employees act against the interests of their employer and abuse their position to achieve personal gain or advantage for themselves or others. Examples of corruption include:
- payment or receipt of bribes
- a serious conflict of interest that is not managed and may influence a decision
- nepotism, where a person is appointed to a role because of their existing relationships, rather than merit
- manipulation of procurement processes to favour one tenderer over others
- gifts or entertainment intended to achieve a specific outcome in breach of an agency’s policies.
Losses resulting from fraud and corruption
It is difficult to measure total losses due to fraud and corruption. As well as financial losses, there are indirect losses, including productivity losses and damage to the community’s trust in the local government sector.
How A Transparency Portal Supports Accountability And Transparency In Local Government
Theres another way that citizens can encourage their local officials to step up and demonstrate their commitment to ethical leadership, and thats by implementing a Transparency Portal by iCompass, a Diligent brand. A Transparency Portal is a seamless extension of a local government website thats designed with the accountability and transparency of local government in mind.
Citizens can use the portal to view council meeting agendas and minutes. They can even view a council meeting in progress in real time, which makes access to local government convenient for shut-ins and disabled people, as well as all citizens. Using a simple search box, citizens can retrieve all public documents within seconds. Theres no better investment of tax dollars or a sure way to ensure accountability and transparency of local government than by implementing a Transparency Portal by iCompass, a Diligent brand.
Lena Eisenstein is the Commercial Alignment Manager for Content Strategy at Diligent Corporation. She builds and maintains content strategies that provide relevant, top-value thought leadership that resonates with directors and governance professionals. Lena graduated from the University of Delaware with a B.A. in English and a minor in journalism. She has dreams of fulfilling her passion for the wine industry and one day opening her own vineyard.
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Fraud And Corruption Controls Over Staff Expenditure
Councils deliver vital services including health, community support, economic development, and waste and environmental management. To perform these functions, councils collect funds, in the form of rates and charges, to deliver services to the community. Council staff are responsible for using these funds responsibly to further council objectives.
The expenditure of council funds by council staff is a fraud and corruption risk that each council must mitigate. Fraud and corruption risks include a council staff member:
- using a council credit card for personal use
- using a council fuel card to fill-up their own vehicle
- seeking reimbursement for items not bought, or not for genuine council business.
Under the Act, councils must ensure that all money they spend is correctly used and properly authorised and develop and maintain adequate internal control systems. We assessed whether councils had adequate fraud and corruption controls over:
- council credit cards
- reimbursements made to staff.
Reform Strategy In Guadalajara Mexico
Guadalajara is the second megalopolis in Mexico with 1.5 million habitants. The metropolitan area has 4.5 million people distributed in nine municipalities. The local government of Guadalajara has made important efforts to foster transparency in its fight against corruption with four main strategies: 1) Open data strategy to make local government information primarily accessible 2) Accessible performance and infrastructure information through the development of El Mapa de Guadalajara, a site that made information about infrastructure available, so it can be understood for its habitants in terms of indicators and performance 3) Enhanced citizen participation Guadalajara has 14 mechanisms of participation that promote the involvement of its citizens in local decisions, and 4) Improved Management System through the Integral City Management Platform. For more detail, see Smart Cities conference Transparent and accountable cities: innovative solutions for municipal management and finance Madrid, 2017. Session 4 innovative solutions to increase local capacities in the fight against corruption
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How To Spot Potential Signs Of Corruption
Spotting corruption can be difficult, especially if no one is looking for it. However, history has shown us that there are telltale signs of corruption in local government.
Corruption is more likely to occur when there are few or no watchdogs. If you live in an area where one political party dominates the government, there is less likely to be any objective oversight. Investigations may be light or nonexistent. Its the old adage, What you dont know wont hurt you, until it does.
Dont count on the fact that corruption doesnt occur in your area. Because Illinois is known for its corruption, the University of Illinois did a study of local government corruption. Surprisingly, Miami and Newark surpassed Chicago, with each city having over 400 corruption convictions within a nine-year timespan.
It also pays to be aware of court systems that are light on convictions. The acquittals of the police officers in the Rodney King case, and another Los Angeles case in which a store owner killed a young African American girl and served no jail time at all, demonstrate that the justice system isnt always as just as citizens would like it to be.
Other signs of possible corruption are when family members get insider jobs, public officials suddenly become wealthier, the local government budget is always dry, the towns infrastructure is crumbling and the FBI has a viable presence in your area.
What Is The Council Doing To Deal With Fraud And Corruption
The council has in place an Anti Fraud and Corruption Policy and Strategy which confirms the councils total opposition to fraud and corruption of any kind. It also sets out the measures in place to help prevent and detect fraudulent or corrupt acts.
Through the Annual Audit Plan and other monitoring and performance procedures the council will continuously:
- review the effectiveness of internal controls
- review the arrangements to safeguard the councils assets
- assess compliance with agreed policies and procedures
- advise on financial controls
- review the reliability of management information
The council has a Whistleblowing Policy and Procedure to enable staff to raise concerns safe in the knowledge that they will not suffer any recrimination as a result.
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Transnational Initiatives In Sub
Transnational initiatives – Guidance summary
Review what international sector efforts are active in tackling corruption in your sector. They may be sources of knowledge, ideas, support and assistance in the development of your initiative. Sector-specific organisations include:
- Professional sector associations
- Initiatives and programmes targeted on building integrity, raising transparency and reducing corruption in the sector
- Multilateral organisations associated with the sector . They too may have anti-corruption knowledge and capability.
Non-sector-specific organisations also have sector knowledge. These include:
- Multilateral economic organisations such as World Economic Forum, IMF and OECD among these,
- OECD has a large group focused on public integrity and anti-corruption.
- There are multiple stand-alone initiatives focused on issues such as beneficial ownership transparency, or access to information.
- Multilateral development organisations, like the World Bank, UNDP and U4, can hold valuable sector knowledge and expertise, whether or not you are based in a developing country.
Acting Upon Your Suspicions
If you suspect that fraud or corruption is being committed there are a few simple guidelines that should be followed.
- Make an immediate note of your concerns. Note all relevant details, such as what was said in telephone or other conversations, the date, the time and the names of the parties involved.
- Convey your suspicions to someone with the appropriate authority and experience. For staff this is usually your manager or Internal Audit, although it could be to any of the people or organisations listed below. For customers this will be the councils Chief Executive, the Monitoring Officer or the Audit and Risk Manager. Again, any of the contacts below can be used.
- Deal with the matter promptly, if you feel your concerns are warranted. Any delay may cause the council to suffer further financial or reputational loss. Dont be afraid to act and remember to use the confidential reporting lines if you are worried about revealing your identity.
- Do nothing.
- Be afraid of raising your concerns. Staff will not suffer any recrimination as a result of raising a concern in good faith.
- Approach or accuse any individuals directly. You may have misinterpreted a perfectly genuine situation.
- Try to investigate the matter yourself. There are rules concerning the gathering of evidence for use in criminal cases. Proper investigative procedures must be followed.
- Convey your suspicions to anyone other than those with the proper authority.
If in doubt raise your concerns.
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Justice And Rule Of Law Reforms
In low corruption environments, criminal investigation and prosecution of corruption is a normal, periodic part of professional life. Sadly this is the exception rather than the norm. Nonetheless, even in environments where mainstream courts are slow and risky, speaking out and putting senior individuals under investigation can change the culture.
Equally, you can change the organisation dynamics if you make it clear that sanctions or disciplinary action will definitely be taken. Often such sanctions do exist, but have fallen out of use or have been taken over by special interest groups. In this case you have first to reclaim the proper functioning of these disciplinary mechanism, but that is much easier than trying to engage with the judicial processes.
One good example already referred to is the Mayoral initiative of zero tolerance in La Paz, Bolivia in 2002. Butan anti-corruption strategy focused only on punitive measures is usually not successful, and is not the norm internationally Research comparing 41 national anti-corruption strategies. Insights and guidance for leaders. This failure is usually attributed to two reasons: 1) the investigations are usually complex, prosecution is invariably slow, and the judicial process is often itself corrupted and 2) Most people want to behave with integrity, so you are likely to get a larger take-up of changed behaviour with positive and nudging measures.
Appendix B Credit And Purchasing Card Testing Methodology
To test the effectiveness of the credit and purchasing card controls, we examined a selection of purchases made on council credit and purchasing cards to confirm that they were for official council business and in accordance with council policies and procedures.
We requested card transaction data for all four councils and from their banks within our testing period of 1 July 2015 to 30 June 2018. Due to some of the audited councils moving from hard copy files to electronic systems to store credit card transaction data, and banks not always storing historical data, the time frame for the data we collected for each council differed, as shown in Figure B1.
Figure B1Time period for transaction data collected from each council
29 June 2018
VAGO, based on council data.
Due to the limited data available for collection from Strathbogie, we were only able to run data analytics over credit card transactions that occurred after 2 February 2017. However, where these tests identified high-risk cardholders, we were able to request hard copy files of transactions for these cardholders.
We ran data analytic tests over the available transaction data for each council to identify anomalies and potential high-risk transactions that would indicate inappropriate card use. These data analytic tests included identifying transactions:
Selecting transactions for further investigation
Review of transactions
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Developing An Overall Approach
Now that you have done the analysis of the specific corruption issues , and you have brainstormed with colleagues and others on what reform approaches and specific reform measures may be feasible in your context , the third part is to think through and develop your overall strategy.
Political & Tactical Approaches – Guidance summary
This is the political, judgemental, tactical part of the strategy formulation exercise. It starts with how to shape the overall approach. Would it be most effective to mainstream the anti-corruption improvements within a larger improvement initiative? Or to adopt an incremental approach, keeping the anti-corruption measures below the political radar? Or tackle just one vital aspect of the corruption problem so as to concentrate effort and have a visible result? Would the organisations output be better if the overall anti-corruption approach was framed as integrity-building, as confidence-building, or directly as confronting corruption? The actionable reform approach will be more political, more contextual and more time-bound than individual measures how to build support, how to spread the benefits, how to bring opponents on board or how to outflank them.
Issues to consider include:
Size Of A Municipality
Smaller municipalities may be more prone to experience corruption within their local government. These towns and villages nominate residents or officials to represent and run the local government, sometimes without oversight approval from higher levels of government. In a small community, personal opinions and relationships play a larger role in politics. Due to this, problems like nepotism or extortion can be prevalent. In addition, some local governments face another kind of disadvantage – lack of experience and professionalism from their representatives. It can be a challenge to attract qualified up and coming politicians to small towns. Another major issue in small municipalities lies with accountability – some have inadequate or insufficient structures for policing and prosecution of corrupt local officials, culminating in a difficult situation for those affected.
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Managing Conflicts Of Interest
All councillors and council employees have private interests. However, these private interests can at times conflict, or be perceived to conflict, with the performance of their public duties. Effective management of conflicts of interest is vital to maintain public trust and ensure that council decisions are in the public interest and free from inappropriate influence and personal gain. IBAC, LGI and VO investigation reports frequently reference poorly managed or undeclared conflicts of interest.
Ordinary Returns and Related Party Disclosures
The Act and the Accounting Standard require councillors and certain council staff to declare their interests, which helps identify and effectively manage potential conflicts of interest associated with their roles.
Ordinary Returns process
Under the Act, councillors and nominated officers must submit Ordinary Returns in the prescribed form to the CEO within 40 days after 30 June and 31 December to declare their interests.
Ordinary Returns capture information such as whether a councillor or nominated officer:
Related Party Disclosure process
Responsibility to declare interests
The responsibility to complete these interest declaration processes and accurately declare interests rests with the individual. However, the audited councils facilitate these processes by sending copies of required forms, explaining the process and tracking completion.
Completing declarations of interests
VAGO, based on LGI media releases and Wyndham data.