Operation Lansdowne: institutional weakness allowed ‘sausage factory’ scam

By David Donaldson

Friday December 8, 2017

A $2.2 million vocational training “scam” occurred thanks to a lack of oversight by the TAFEs outsourcing the work, Victoria’s anti-corruption agency has found.

“Weaknesses in the systems and controls of South West Institute of TAFE and Bendigo Kangan Institute of TAFE” had “allowed the scam to flourish”, says the report tabled in parliament by the Independent Broad-based Anti-corruption Commission Friday morning.

IBAC found that Rebecca Taylor operated a scam she referred to as the “sausage factory”, through which she received around $2.2 million in government funding under subcontracting arrangements with the two TAFEs — for training that did not take place.

There was essentially no oversight by the TAFEs of Taylor’s activities and claims to public money, “despite obvious anomalies and deficiencies”, says the report. “The two TAFEs did not appear to be fully aware of the risk of fraud associated with such third-party agreements.”

IBAC also found Maurice Molan, former executive manager at South West Institute of TAFE, misused his position to award Taylor with educational qualifications to which she was not entitled.

“The Victorian community would be right to be extremely concerned with the misappropriation of these funds,” said IBAC Commissioner Stephen O’Bryan.

“In recent years, there has been considerable attention on the challenges confronting the vocational education and training sector, including concerns around TAFEs’ financial sustainability and the vulnerability of the sector to unscrupulous providers.

“Funding for the sector is limited and should be directed towards ensuring people — including disadvantaged people in regional areas — obtain high quality, skills-based training that properly equips them for work.

“The community also expects that people who obtain qualifications in technical areas such as engineering, are in fact so qualified.”

IBAC’s investigation expanded to include the circumstances surrounding the recruitment of particular employees and the engagement of certain contractors (including Taylor) by V/Line.

The investigation identified that between 2013 and 2016 there was a clique of senior V/Line officers who placed undue emphasis on who people knew and personal friendships, wilfully disregarding the required public sector merit-based procurement and recruitment standards.

“V/Line provides critical public transport services to Victoria’s regional and rural communities and Victorians rightly expect that the trains and services under V/Line’s control are properly maintained and delivered to the highest standards by people who are appropriately skilled and qualified. A failure to do so unacceptably risks public safety,” O’Bryan said in a statement.

IBAC identified an environment at V/Line where clear conflicts of interest were not declared or managed, “allowing a culture of cronyism to flourish”. Red flags — including blatant contract splitting, a lack of documentation to justify procurement (such as business cases), insufficient segregation of duties, and inadequate contract documentation — were not acted upon.

IBAC recommended the responsible agencies address the identified vulnerabilities. Recommendations include:

  • The Department of Education and Training review TAFE training delivered via other third-party agreements, to verify the legitimacy of that training.
  • The secretary of the Department of Premier and Cabinet, in conjunction with the Victorian Public Sector Commissioner, review ways in which probity in public sector recruitment can be strengthened.

South West Institute of TAFE, Bendigo Kangan Institute of TAFE, V/Line, and DET are required to report on the implementation of these and other recommendations to IBAC by December 31, 2018.

IBAC will also consider whether it is appropriate to compile briefs of evidence for the consideration of the Office of Public Prosecutions.

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