Internal investigations

Deciding whether to undertake an internal investigation is a key part of an organisation's response to detected or suspected corruption.

All internal investigations need to adhere to natural justice principles, confidentiality, rules of evidence and standards of proof, legal and policy compliance, and health and safety regulations. Detailed advice and guidance on these matters is given in the ICAC publication, Fact-Finder, which should be a basic reference for those considering or undertaking an internal investigation.

"Natural justice" or procedural fairness, refers to three key principles:

  • The person being investigated has a chance to have his or her say before adverse formal findings are made and before any adverse action is taken
  • the investigator(s) should be objective and impartial, and
  • any action taken is based on evidence (not suspicion or speculation).

It is not enough to simply undertake an internal investigation and write a report.  Managers need to act on any findings and/or recommendations!


The role of internal investigations

The purpose of an internal investigation is to find out what actually happened and identify what action is needed to protect the organisation from loss or harm. An internal investigation is a fact-finding exercise, not a trial or tribunal. The investigation may make findings and recommendations, but it is not the investigator's role to act on these findings and recommendations.

A poorly conducted internal investigation may result in corrupt employees going unpunished, individuals under investigation being treated unfairly and the organisation's resources being wasted. Evidence from investigations not conducted properly is disregarded by such bodies as the ICAC, Police and NSW Ombudsman and may not be admissible in any later court proceedings. 

The ICAC can require an organisation to undertake an internal investigation (under section 53 of the ICAC Act) and to submit  a report to the ICAC (section 54 of the Act – see Section 54 Reporting Guidelines). This occurs when the ICAC receives and considers an allegation and decides that the organisation itself should investigate (the ICAC focuses its own investigative activity on "serious and systemic" corruption)


Senior management and internal investigations

Several ICAC investigations have found that inadequate internal investigation capacity – including insufficient training and experience on the part of managers in responding to reports of corrupt conduct – was a factor in corruption occurring or continuing.

Senior management should ensure that their organisation has a policy on and procedure for conducting internal investigations and/or outsourcing them.  The purpose of such a policy is to ensure that internal investigations are guided by sound and consistent principles and rules, and therefore to avoid any allegations of bias.  The procedure should provide for the appointment of an external investigator to conduct an investigation should this be necessary, such as when potential internal investigators have conflicts of interest, allegations involve a senior official or an agency does not have the capacity to conduct its own investigation (e.g. because it is too small).

During an internal investigation staff may ask what is going on.  Senior managers need to balance confidentiality and privacy considerations with trying to maintain staff morale. Advice on these matters is given in the ICAC publication, How to handle the effects of an ICAC investigation, ICAC, 1999.

A section 53/54 referral does not give you the powers of the ICAC.  The powers you have are those that you would ordinarily have when conducting an internal investigation.


Case study

 Flawed internal investigation

An ICAC investigation into a government agency found that an internal investigation into an allegedly corrupt employee was flawed and its findings were ignored.

The agency commenced an investigation into the employee's conduct after receiving allegations that he was producing false documents for members of the public in return for bribes.  The unit manager instructed four staff – including two staff who were colleagues and peers of the employee – to audit the employee's work.  The two staff were not told the reasons behind the audit, but were told not to tell the employee that they were auditing his work.  This presented difficulties for the staff as they worked closely with him.

The ICAC found that it was unacceptable to have close colleagues and peers of the subject of a complaint conduct the investigation.  It also found that the agency failed to take any action to deal with the risks that were exposed by the internal investigation.

The ICAC recommended that the agency develop and implement a complaint-handling and investigation policy and procedure to respond to allegations of corruption.  It also recommended that managers responsible for responding to allegations of corruption receive training in the policy and procedure.

 

Frequently asked questions

When should my organisation conduct an internal investigation into corrupt conduct allegations?
  • As a rule of thumb, agencies investigate matters – following advice from the ICAC – when the conduct, if proved, is likely to result in dismissal or demotion.
  • However, if you suspect a matter concerns corruption you should report it to the ICAC before doing anything.
  • The ICAC may then ask your agency to conduct its own investigation under section 53 of the ICAC Act. Commencing an investigation without waiting for the ICAC's advice could compromise any action the ICAC may take.
What do we do with evidence that we collect?
Evidence should be stored and labelled systematically, and kept confidential. Original documents should not be altered or annotated in any way. How you collect and store evidence will have a critical impact on their value as evidence in any later inquiries or court proceedings.
What do I do if I detect evidence of a criminal offence (e.g. fraud)?
Tell the ICAC and the NSW Police Force.
Do I need to tell someone I am investigating, or that they are being investigated?
You do not need to tell someone that they are being investigated until you want to make an official finding and/or take disciplinary action. Then, before official findings are made, the person needs to be shown the evidence and given an opportunity to respond.


Resources


ICAC publications

 

Other publications

  • Managing Information arising out of an investigation, NSW Ombudsman, Sydney, May 2009.
  • Reporting of progress and results of investigations, NSW Ombudsman, Sydney, August 2008.
  • Facing the facts: a guide for dealing with suspected official misconduct in Queensland public sector agencies, Crime and Misconduct Commission, Brisbane, 2007
  • AS 8001-2008, Fraud and Corruption Control, Standards Australia, March 2008. See Section 5 on "Response", pp. 47–49
  • Fraud and corruption control: guidelines for best practice, Crime and Misconduct Commission, Brisbane, March 2005. See Chapter 7 "Investigations"
  • Independent Commission Against Corruption Act 1988 (NSW). See Part 5 for the full provisions concerning the responsibility of public authorities to investigate and report to the ICAC.
  • Investigating complaints – A manual for investigators (2nd edition), NSW Ombudsman, Sydney, June 2004
  • Iyer, Nigel, and Samociuk, Martin, "Managing Incidents", Chapter 6 in Fraud and Corruption: Prevention and Detection, Gower Publishing, Aldershot UK, 2006, pp. 99-109
  • Managing the Business Risk of Fraud: a Practical Guide, Institute of Internal Auditors, The American Institute of Certified Public Accountants, Association of Certified Fraud Examiners. See Section 5, "Fraud Investigation and Corrective Action", pp. 39-44
  • Public Interest Disclosures Act 1994 (NSW)
  • Public Interest Disclosures Guidelines, NSW Ombudsman, Sydney.
  • Public Sector Fact Sheet No 14: Natural Justice/procedural fairness, NSW Ombudsman, Sydney.
  • The Personnel Handbook, NSW Public Service Commission.

Relevant ICAC investigations

Below are some examples of ICAC investigations that found inadequate internal investigation capacity was a factor in the corruption that occurred:

 

Relevant websites

 

Related topics on the ICAC website

 

Tools

Internal investigations and internal investigation reports, including those requested by the ICAC under section 53/54 of the ICAC Act, should follow a certain format. The tools below give advice on structure and content:

  • ICAC's Fact-finder publication provides guidelines to agencies on how to conduct an internal investigation.
  • ICAC's Section 54 Report Guidelines: what to include in your report to the ICAC – this includes a checklist of what should be included in an investigation report requested by the ICAC under section 54 of its Act.

The Queensland Crime and Misconduct Commission's publication, Fraud and corruption control: guidelines for best practice (March 2005), contains (on p. 65) a checklist to assist agencies evaluate their overall investigations management capacity. Facing the facts: a guide for dealing with suspected official misconduct in Queensland public sector agencies (Crime and Misconduct Commission, Brisbane, 2007) outlines the various steps involved in conducting a formal investigation.

Training: The ICAC offers "Fact-finder" training in conducting internal investigations for NSW public agencies. Contact the Commission's Corruption Prevention Division for dates of the next training session or check the ICAC website for details of forthcoming training activities.

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