Investigation summaries

Operation Panarea was an investigation into a notification from VicRoads regarding allegations of suspected corrupt conduct relating to inappropriate procurement practices by employees at one of its depots. As part of Operation Panarea, IBAC interviewed relevant witnesses and reviewed the agency's procurement policies and procedures.

Outcome

While the allegation could not be substantiated, IBAC identified a number of issues and corruption vulnerabilities associated with VicRoads procurement practices:

• instances of failure to comply with procurement processes
• a lack of awareness of procurement policies and inadequate training among some staff
• inadequate record keeping in relation to procurement
• ineffective internal controls to identify non-compliance
• lack of oversight by senior management including evidence of poor workplace performance and supervision.

As a result of this investigation, IBAC recommended that VicRoads review its procurement policies, procedures and practices to address the corruption vulnerabilities identified, including to ensure sound frameworks are in place in relation to:

• fraud and corruption risks with procurement
• procurement systems and controls
• risk management and audits
• staff awareness of procurement policies and procedures, including training.

IBAC requested that VicRoads provide a report to IBAC on the implementation of this recommendation within six months.

In August 2018, VicRoads Chief Executive Officer provided a response to IBAC, outlining the key actions it had taken to address the issues and corruption vulnerabilities identified in Operation Panarea.

VicRoads highlighted the work it has already undertaken to address the identified issues resulting from Operation Helena, and additional actions it is in the process of undertaking to further reduce corruption risks associated with procurement within the organisation.

VicRoads response is summarised as follows:

Corruption risks associated with procurement

Responsibility for the management of corruption risks associated with procurement has been defined at the strategic, tactical and operational levels within VicRoads. Defined governance and assurance structures to identify and mitigate patterns of inappropriate and non-complaint behaviours, form part of the organisation's 'Procurement Assurance Framework', which is underpinned by learnings from internal procurement activities, and learnings from IBAC reports, as well as educational documents and prevention activities associated with other government agencies.

VicRoads' 'Procurement Assurance Framework' applies a structured, forward-looking approach across the organisation, designed to significantly strengthen internal 'detection' and 'prevention' enforcement activities, supported by operational policies, procedures and reporting structures, all linked to the organisation’s Risk, Audit and Fraud & Corruption governance standards.

Procurement systems and controls

VicRoads' procurement systems and internal controls are shaped by intelligence and therefore prevention-focused. VicRoads has established a procurement action plan, enabled by technology, with defined roles and accountabilities to extract the optimal level of value from procurement activities, supported by internal support programs to help incorporate business experience to the procurement function, as well as providing risk and compliance insights.

VicRoads action plan is being implemented across the organisation in a phased approach, supported by the organisation's Procurement Division.

Staff awareness of procurement policies and training

VicRoads' 'Procurement Capability Development Plan' supports the organisation's approach to better decision making, improved governance and transparency and costs saving and operational excellence in procurement management. VicRoads' 'Procurement Capability Development Plan' has been in operation across the organisation for the past two financial years and is currently undergoing review and assessment to help identify improvements to procurement processes and to provide recommendations to track solutions.

VicRoads' 'Procurement Capability Development Plan' includes specific training in the conduct and management of procurement activities, including purchasing rules and guidelines, supported by online e-learning modules and interactive face-to-face procurement training courses that focus on procurement best-practice, conflict of interest, probity in procurement and contract management. VicRoads has also introduced targeted specialist training on procurement 'red flags', including Supplier Category Management & Relationships and Procurement Negotiation Training.

VicRoads has also developed specific 'Category Management and Assurance Dashboards' that support procurement staff and management representatives to visually identify expenditure by category, supplier and geographical area across the organisation. Implementation will commence from March 2019.

Risk management and audits

VicRoads has updated its 'Risk Management Framework' and developed a 'Compliance Management Framework' that aligns with its internal audit program of work for the 2018/19 financial year, that incorporates an internal audit of procurement systems and controls to provide independent assurance. Specific internal audit activities have been adjusted for high-risk areas to include a minimum of one internal audit per work group, each financial year. Any non-compliance events are reported to the Senior Leadership Team for review and decision.

IBAC publishes responses to our recommendations in order to inform the community about actions agencies advise they are taking, and to share learnings that may help other agencies improve their systems and practices.