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So… how many horses can I get for $53 million?

Posted by Melanie Webb | Governance and accountability | Mar 20, 2018

Sometimes, the stories I hear at work are completely unexpected.

horses

All The Queen’s Horses is the tale of one woman’s fraud. She stole $53 million from the city of Dixon, Illinois, in the United States of America. And spent it on horses.

Although we haven’t had that level of staggering fraud here in New Zealand, we can’t get complacent.

Julie Read, chief executive of the Serious Fraud Office, talked about the movie (and the recent Fraud Film festival) during the latest Leaders Integrity Forum meeting held here at the Office of the Auditor-General, organised by Transparency International New Zealand. After listening to Julie talk about what other countries are doing, New Zealand’s culture of willing compliance, and her view of the risks we face with procurement, conflicts of interest, grants, and gifts (among others), I was starting to think that New Zealand’s enviable position on the Corruption Perceptions Index might be more a matter of good luck than good planning.

Is that too strong a concern? Maybe. New Zealand has some good systems and controls, and we know that openness and transparency are hugely important. But we’re also a trusting bunch here in Aotearoa. And as Julie noted, we should encourage people to look for and report fraud.

Our Deputy Auditor-General, Greg Schollum, introduced the topic and the speakers at the Leaders Integrity Forum meeting. He made the very good point that the financial costs are only part of the story. The costs to workplace morale and culture are intangible but uncomfortably high. And any chipping away at New Zealanders’ trust and confidence in the public sector is a cost we can ill afford.

When Andrew Bridgman, Secretary for Justice, talked to us, he focused on the importance of integrity to our way of life. As an example of the importance of integrity, he talked about Papua New Guinea. For all its bountiful resources - a nation he described as a mountain of gold floating on a sea of oil - PNG has problems. In 2017, it was 135th on the Corruption Perceptions Index and scored 29 out of 100. If you go to ifitweremyhome.com and compare New Zealand to Papua New Zealand, it’s a sobering read. Corruption isn’t the only factor feeding into an inability to thrive, but it plays a part.

More developed nations certainly aren’t perfect. But Andrew is confident that when we deal with the justice system in New Zealand, we deal with public servants, court officials, and judges who understand that openness and integrity are fundamental to justice. It’s also fundamental to New Zealand’s trade and economy. Integrity is not everything… but it is almost everything. And integrity relies on a robust culture along with robust systems.

The importance of a workplace’s culture

Greg, Julie, and Andrew all noted that prevention is better than detection. Although fraud is immoral, it’s also rational. Everyone has a tipping point. Part of preventing fraud is making sure that employers run robust, transparent merit-based appointment and performance review processes. Such systems reduce the risk that people are aggrieved with their pay or hours or conditions and form a view that fraudulent behaviour is justified. The more transparent our systems, the more likely that wrongful behaviour will be seen and the less likely individuals will make the decision to do wrong. As Andrew put it, the price of the freedoms we all enjoy is eternal vigilance.

Stealing public money or public assets has to be too risky to contemplate. When it does happen - because it will - then the systems need to be strong enough to detect it, the culture needs to recognise and reward those who call it out and leaders need to be strong enough to act.

The importance of a workplace’s systems

So what makes for strong systems? Regular reviews. Visible systems. Tight processes. Openness. An awareness that conflicts of interest need to be identified and actively managed. And listening to your auditor...

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