ICAC recommends sweeping changes to RailCorp to combat entrenched corruption

Monday 15 December 2008

The Independent Commission Against Corruption (ICAC) has made 40 recommendations to combat corruption at RailCorp after one of the largest investigations in the Commission's history.

The investigation uncovered almost $19 million in improperly allocated contracts that were awarded to companies owned by RailCorp employees, their families and/or friends in return for more than $2.5 million in corrupt payments.

In the eighth and final report on its Investigation into bribery and fraud at RailCorp, released today, the Commission says that the investigation has exposed an "extraordinary extent of public sector corruption. Corrupt employees appeared to be confident that they would not be caught or if they were, that not much would happen to them."

"Corruption in RailCorp is not a few 'bad apples,'" ICAC Commissioner the Hon Jerrold Cripps QC says in the report. "The very structure of the organisation and the way it operates allows and encourages corruption. The Commission is of the opinion that the decision to outsource the provision of certain goods and services in an environment of dysfunctional markets, a lack of internal firewalls within procurement positions, the inability of management to effectively manage the procurement process, and the weak oversight of the RailCorp Board of an activity fraught with corruption risks, worked in concert to allow the widespread corruption to develop," the report says.

"The investigation and findings entitle the Commission to infer that the type of corruption exposed extends beyond those individuals identified in this investigation," the report notes. "Therefore the conclusions have applications throughout RailCorp and for other agencies involved in procurement."

The report describes record-keeping at RailCorp as "shambolic" and says that its form of contracting, process design, reporting arrangements, management competence, culture and oversight arrangements all contribute to endemic corruption in the organisation. The ICAC identifies four critical areas for reform, recommending that RailCorp:

  • reduce procurement risk by ensuring that it buys only what it can adequately monitor
  • create firewalls that remove end-to-end control of procurement by single individuals
  • improve overall managerial effectiveness in the Asset Management Group (the focus of this investigation)
  • improve oversight, especially by ensuring that corruption risk management strategies are implemented.

The report says that since 1992 the Commission has conducted six previous major investigations into RailCorp, all of which found corruption. "Much of the corruption found previously was similar in nature to that exposed in this investigation," it observes.

"All the recommendations (in this report) need to be implemented if RailCorp is to reduce corruption. Beyond the Asset Management Group, it is clear that the importance of preventing corruption in RailCorp was not a priority for the senior executive team or part of the standard oversight framework of the organisation," the report says.

"Ultimately, responsibility for preventing corruption in this critical public organisation is shared by RailCorp's CEO, the RailCorp board and the Minister for Transport," the report says. "It is encumbent on them to break with past practices and improve oversight and action regarding corruption prevention."

The Commission recommends that the responsibilities of the proposed RailCorp Advisory Board, the RailCorp CEO and the Minister for Transport be reviewed to determine whether they need to be restructured to better ensure financially responsible management that would limit the opportunity for corruption.

The Commission also recommends that a skill profile for the proposed Advisory Board as a whole be developed and that members be appointed on the basis of their complementing the profile.

The report also recommends that management position descriptions be revised to help prevent corrupt conduct. In the case of the Group General Manager – Asset Management Group this should be done to make management and probity capabilities more central to the role.

In the case of the CEO, their contract should be revised with a view to incorporating into it performance targets relating to corruption and corruption prevention that can be independently audited, and the achievement and non-achievement of performance targets be linked to consequences.

The corruption prevention recommendations in the report are directed to RailCorp, the RailCorp Board and the Minister for Transport. The Commission will monitor the implementation of the recommendations made as a result of this investigation.

Fact sheet

Investigation report