Academic Corruption

1. Risk and Technology Services Academic Corruption Internal Auditors as Zoo Keepers ‘Crikey!!!’ Pat McCallum Senior Manager Fraud Risk Services

2. Outline • Objective • To take the challenges of the NSW ICAC Report Degrees of Risk • Explore a framework for responses by Internal Auditors • In 45 minutes or less. • Topic Areas • Degrees of Risk, The Report • Ethics Failure/Corruption/Fraud • Controlling the Conduct of Professionals

3. Degrees of Risk “The pressure of competition for …. funds and clients, puts universities in a high-risk category” • The Learning Process • Cheating, plagiarism, soft marking, favouritism • The Research Process • Falsifying results, favouritism in employing staff, pecuniary interest, undeclared conflicts of interest, misuse of research funds • Financial Processes • Fraud, undeclared conflicts of interest, accepting bribes, gifts or other benefits

4. Degrees of Risk .. Cont’d .. • Management and Administration • Undeclared conflicts of interest, misuse of resources, inappropriate recruitment and selection processes, abuse of confidential information • Staff Behaviour • Falsifying credentials, plagiarism, favouritism, accepting bribes, gifts or benefits, pecuniary interest, undeclared conflicts of interest, abuse of confidential information • Corporate Behaviour • Failing to take action if wrongdoing is reported, collusion

5. Degrees of Risk …….. Cont’d • Behaviour across the sector • Setting standards or processes that discriminate • Behaviour between university and private business • Lack of transparency in and evaluation of outsourcing/ contracts/ commercial activities, contract arrangements leading to provider capture and inappropriate contracts, and no market testing for the service, • pecuniary interest, undue influence in university processes or procedures, research or teaching. (Phew!!!!)

6. ETHICS FAILURE CORRUPTION Minor stuff ups Go to Goal FRAUD CRIMES OFFICIAL MISCONDUCT MISCONDUCT Ethics Failure

7. Ethics Failure - A Serious Issue? • Enron/Andersen • Disaster! • Queensland Law Society • Loss of right to self discipline? • Catholic Church and Sexual Abuse • Overseas $, All regions reputation Can a University disappear through Ethical Failure?

8. News – Government rethink on stem-cell research funding • "The Prime Minister is seeking advice as to any implications for the ($43.5 million Centre for Stem Cells and Tissue Repair) funding," the spokeswoman said. "He is disturbed about the apparent misrepresentation and he is making some inquiries about that." • Professor Trounson will head the new stem-cell research centre, which won the Biotechnology Centre of Excellence Funding from the Federal Government ahead of a range of other proposals three months ago. 28 August 2002, The Age

9. Private Sector Example $21m Fraud

10. Response to Ethics Failure • External Control • Broad Anti-Corruption Policies, Procedures, Codes, Rules, Laws • Control through work contracts (Tenure limits effectiveness) • Tough consequences for violations • Internal Control • Self Policing – Moral Direction • Developing, Character Integrity and virtue. • Organisational Learning - Professional Ethics

11. Ethical Codes • Codes of Ethics • Impact Values and Beliefs. Weakly if espoused and Strongly if deeply ascribed. • Codes of Practice • Impact Choices. Weakly as guidance and strongly as directions. • Codes of Conduct • Impact Behaviours. Weakly if only for proscribed behaviour and strongly if acceptable behaviour is prescribed.

12. Is Academia a Zoo? • Academic Freedom as the call of the wild • Professional Self Regulation as natural selection • Downsizing/ Increased Loads as ‘pen fever’ • Private Consulting as Rogue Beasts • Secondary Employment as Pen Jumping Perhaps it is more of zoo than it used to be.

13. Availability of Suitable TARGETS Internal Controls Supply of Motivated OFFENDERS Absence of Capable GUARDIANS • Management • External Audit • Internal Audit • Professional Bodies • Regulators, DEST • Personality • Environment • Motivation • Neutralization EthicalCulture The AIC General Crime Model

14. Rationalisations/(Neutralisations) • Internal controls limit academic freedom (Collegiality) • Commercial arrangements may also limit academic freedom and impact on collegial effort through secrecy and lack of transparency • I control these funds because my ideas attracted them • Funds are almost universally the subject of contractual and/or public duty limitations. Uncontrolled funds are a high risk for engendering corrupt activity. • I am a professional and should not be subject to administrative sanction • Rule of law

15. Neutralisations… cont’d • Its just a few bad apples • In fact they are generally fellow professionals who have given in to the endemic temptations of their profession.

16. Another job for AS/NZS 4360? “The ever more competitive and commercial environment of higher education introduces risks of a different dimension into day-to-day activities. These risks must be identified and managed.” (p. 17) • Do we have a process for identifying and managing risk? • Generally Australian/NZ Standard 4360 “The management of these .. Risks must be integrated into all university policies, procedures and practices.” (p. 17)

17. Monitor and Review Communicate and Consult Establish the Context Identify Risks Analyse Risks Evaluate Risks Accept Risks Yes Treat Risks AS/NZS 4360:1999

18. Calling a Spade a Spade • Hoare Report (1996) • Fraud (2), Corruption (0), Misconduct (0), Dishonest (0), Conflict(5) • Universities in Crisis (Sept 2001) • Fraud (0), Corruption (1), Misconduct (2), Dishonest (1), Conflict(33) • Higher Education at the Crossroads (April 2002) • Fraud (0), Corruption (0), Misconduct (0), Dishonest (0), Conflict(0) • DEST – Meeting the Challenges (August 2002) • Fraud (0), Corruption (0), Misconduct (2), Dishonest (0), Conflict(14)

19. An Ending “An organization’s strategy of response to ethics failure indicates its state of organizational moral autonomy • Its capacity to freely produce a reasoned and constructive resolution to an ethics problem, • Advancing the moral development of the organization, • Protecting the public interest, and • Upholding the basic values of a humane and just society.”

20. One Persons View “An internal auditor is someone who situates himself up on a hill overlooking a battle, far from the noise of the guns and the smoke of the explosions. And he watches the battle from afar, and when it is over and the smoke is cleared, he goes down into the battle field and walks among the wounded. And he shoots them.” Robert Jackall Moral Mazes: the world of corporate. 1988