Academic Corruption

1
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 .. Contd ..

• 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 .. Contd

• 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
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
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 contd

• 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
AS/NZS 43601999
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 organizations 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