New report highlights the perils of poor employee screening

By Stephen Easton

February 28, 2018

The New South Wales corruption watchdog recommends closer screening of candidates in recruitment and promotions as a way of preventing more serious corruption further down the line.

“The detrimental effects that poor employment screening practices have can be very wide reaching, and put agencies at financial risk while impacting on the organisation’s ability to discharge its public service functions efficiently and effectively,” said Independent Commission Against Corruption chief Peter Hall, launching a new report this week.

Between 20% and 30% of job applications typically contain some kind of false information, according to the ICAC report, and in the public sector that could certainly constitute corrupt conduct in itself. While the commission can only speak to the NSW public sector, its latest advice certainly has universal application.

This kind of fraud not only involves lying about qualifications and work experience or setting up sham referees, but also concealing criminal records or disciplinary action from previous employers.

In one example that came out of an ICAC inquiry into a network of corruption at Sydney Water, the new report suggests disgraced former executive Edward Harvey could have been passed over at the application stage, if his referees were contacted:

“Had thorough reference checks been completed, it might have been discovered that the individual failed probation in a previous role due to incompetence. This individual subsequently authorised over $300,000 worth of improper payments.”

Sydney Water representatives told ICAC investigators that if they had known Harvey had been let go by his previous employer, RailCorp, this “would have been a significant aspect in the decision to hire him, or at the very least, dictated the need for vigilance in his supervision”.

“The report provides solutions that will help NSW public sector agencies weed out these problems earlier in the process, before they become a corruption burden on the agency and the state,” the chief commissioner added.

“Furthermore, the ICAC recommends that employment screening should not just be a one-off aspect of the initial recruitment process, but should also be applied during the course of the individual’s tenure, for example, if an individual is to be promoted to a higher position within the agency.”

In another example, ICAC reports the South Western Sydney Institute did not consider the fact that its former employee Ronald Cordoba had a prior fraud conviction when he was promoted to acting ICT manager. ICAC later investigated allegations of serious corruption and he eventually pled guilty to 12 charges related to a $1.7 million rort.

The TAFE knew about Cordoba’s criminal record when he was originally hired, as a teacher, but it was deemed irrelevant to the role. The lesson here, according to ICAC:

“It was a failure to consider the change in risk profile and perform thorough post-employment screening that facilitated his corrupt conduct.”

Another case study in the report comes from north of ICAC’s jurisdiction, courtesy of the Queensland Crime and Corruption Commission, and concerns a $16.69 million fraud committed by a colourful character who became known as the fake Tahitian prince.

“This is a particularly striking example of an individual who obtained a role in the Queensland public service on the basis of falsified and hidden information, and then engaged in further improper behaviour.

“This individual claimed several false qualifications and academic awards, and had a criminal history that was not detected by the agency in question.”

The fake prince, Hohepa Morehu-Barlow, also “performed poorly and frequently engaged in a wide range of misconduct, including bullying, taking excessive leave, not completing timesheets, having unexplained absences, misusing an agency car and falsifying that car’s log book to conceal the misuse”, the report notes.

A different kind of case study demonstrates where the commission is going with all this: risk management. A simplified example shows how a regulatory agency groups positions according to the risk of misconduct, with increasing levels of screening added on top of the standard checks at each level.

This does not necessarily mean screening should be directly linked to seniority or salary.

The ICAC recommends a specific senior manager should have “ownership” of staff screening as a single point of accountability but also that both human resources and risk managers have roles to play.

HR might need to borrow the specialist expertise of industry knowledge of the hiring manager to help them check up on candidates, and if you’re outsourcing recruitment, the report advises:

“Third-party screening arrangements should be carefully managed, both in terms of applying due diligence before engaging a potential supplier and in obtaining evidence of the checks actually conducted by engaged suppliers.”

And even when staff are not permanent, they still need to be screened “although, it may be appropriate to reduce screening requirements for a very short, low-risk contingent engagement” in the ICAC’s view.

In another case study, two agencies complained to ICAC about an “external shared services provider” that proved both incompetent and underfunded. It was unable to correctly perform criminal history checks in one case and, according to the second complaint, “was only able to provide urgent checks because of a lack of resources” but did not tell the agency it was waving through most applicants until it decided to run an audit.

It might sound silly to think anyone could get away with faking their work experience, or getting a friend to pose as a referee, but that’s exactly what the ICAC found in Operation Avoca in 2010.

Operation Bosco in 2003 found a man had been on the NSW government payroll for over 15 years on the basis of fake university degrees.

“These photocopies were false documents because he had dishonestly inserted his name onto other people’s legitimate degrees. As his career progressed, he misrepresented these photocopies to a JP so that they would be certified as true copies of an original document.”

The same operation found that some IT contractors “were often afforded discretion well beyond what was needed to perform their nominal roles, and which were not subject to the same controls as permanent employees” — giving them undue influence over recruitment and purchasing decisions that led to corruption.

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