How to build a corruption-resistant culture in the public sector

Many government agencies take an ‘it won’t happen here’ approach to corruption and fail to create a strong ethical culture but when corrupt activity occurs it can take years to repair morale and reputation.

ANZSOG Associate Dean Gill Callister was named Secretary of Victoria’s Department of Education and Training (DET) in 2015. At the time, the department was in the middle of a corruption investigation that ended the careers of several of its senior leaders. 

As part of ANZSOG’s Thought Leadership series, Ms Callister recently spoke about how DET handled the fallout and built a stronger ethical culture.

“Integrity reform is not something you do just to clean up corruption in the wake of a scandal, it is a hallmark of any high performing organisation – and must be ongoing,” she said.

Ms Callister said DET’s integrity work – carried out alongside delivering major reforms in education – was critical for the organisation’s credibility and its future.

Corruption revelations damaged reputation and morale 

Victoria’s Independent Broad-based Anti-Corruption Commission (IBAC) began in 2012, with powers to investigate serious public service corruption.

The creation of IBAC had been a major issue at Victoria’s 2010 election. Ms Callister said that, at the time, the general attitude of agency secretaries was that IBAC would be overkill: serious corruption did not happen in Victoria, and existing systems, such as the Office of the Ombudsman, would be enough to detect anything untoward.

They were wrong.

In 2015, a few months after Ms Callister started as secretary, IBAC’s investigations and public hearings into the DET – Operation Ord and Operation Dunham – uncovered daily revelations of corruption, theft, and a workplace culture where people were bullied and scared to speak up.

Ms Callister said that the resulting media coverage left the department’s reputation and morale in tatters.

“Many staff felt finally vindicated and able to tell their story but it was with anger and resentment it had taken so long. Staff who had been forced out of the department for not conforming to the culture or angering those in control were either called to give evidence or contacted their colleagues to debrief,” she said.

“One of my most salutary reflections is that at the very same time we were discounting the need for an anti-corruption body back in 2010, this was going on in the department under our noses,” she said.

“And my second reflection is that without the powers of IBAC much of the conduct would not have been uncovered.”

IBAC found systemic issues that enabled the corruption to occur. One of the most damaging aspects of the corruption was that it was driven by senior executives in positions of power who exploited flaws in Victoria’s school funding model for family and personal gain.

“We had a peer group of senior executives who for too long saw themselves above the rules,” Ms Callister said.

“And because they were powerful, their disregard for accountability and ethical conduct had a ripple effect across the organisation.”

Restoring integrity while delivering policy 

Ms Callister said there was no roadmap for how to tackle the avalanche of crises the department faced, while continuing to implement the reforms of the Andrews’ Government’s Education State policy.

But she said she knew the department needed to take strong and swift action.

As the corruption hearings unfolded the department immediately stood down staff who had been involved in misconduct. It also took policy action by introducing an unpopular freeze on staff travel by bureaucrats and principals.

It established tough new governance requirements on all funds allowing the department to regain control of the funding system which had been used to disguise the misuse of funds.

Creating an ethical culture 

These measures were important but building an ethical organisation from scratch – one with healthy workplace cultures, robust systems, and staff who consistently work with professionalism and integrity – would take longer.

Ms Callister said that the department was not “unethical to the core” but had an “ethically neutral culture at a systemic level”.

“This absence of ethical awareness created a vacuum in which unethical conduct, in some pockets, had become the norm,” Ms Callister said.

“IBAC exposed pervasive non-compliance: so much so that working around processes had become accepted practice in many parts of the Department.”

This was fuelled by weak governance and oversight, onerous processes, low accountability and a general lack of consequences.

For example, the department had ignored its own warnings, with the department’s audit and risk committee having recommended abolishing the ‘banker school’ model in 2010. 

The “Three Line” Approach 

Ms Callister said that the reforms she led had taken a “three line” approach to integrity in the department.

The first line is about supporting leaders and staff to act with integrity and manage risk. Those exercising delegations – including financial delegations – must understand the scope and limits of those policies and delegations.

“On leadership, refreshing key executive roles was not enough,” she said.

“We set clear expectations through a Leadership Charter and made executives accountable through an executive development program. We also introduced an executive rotation program to prevent unhealthy networks from re-emerging.”

The department also established a Speak Up hotline to encourage staff to raise concerns without fear of reprisal. This initiative led to a number of substantiated claims and referrals to IBAC, the Ombudsman and Victoria Police, and provided an avenue for staff who felt powerless to do address issues of integrity.

The second line was about strengthening functions that oversee and monitor risk, such as policies, governance and reporting systems.

Finance in particular was critical focus. The then-chief financial officer told hearings that finance had operated wholly as a transactional function, and did not second guess spending decisions if the amount was within a delegate’s limits.

“This meant no one raised the alarm over an invoice for example, for several thousand dollars spent on wine,” Ms Callister said.

“We strengthened accountability through new financial management and monitoring functions, which have greater data analytics capability to identify issues in real time.”

The department’s reforms to conflicts of interest strengthened the first and second lines of defence, including an education campaign and a Conflict of Interest register for staff.

The third line was assurance over management of risk, in particular an independent and robust audit function. The department’s audit program was recently acknowledged by Victoria’s Auditor-General for its standout performance.

Bringing integrity issues together 

Ms Callister established an Integrity and Assurance Division, bringing together the audit team with integrity engagement, policy, performance and investigation functions. 

The workload of the investigations team grew exponentially following the launch of the Speak Up service, with work ranging from managing and triaging complaints, liaising with external investigation bodies, and running fraud and corruption investigations, at times, jointly with the Victorian Ombudsman.     

Ms Callister also established a range of integrity committees which included independent representatives, as well as departmental staff and school principals and business managers.

Key performance outcomes were communicated to staff to ensure they continue to be informed about organisational performance and opportunities to contribute ideas for improvement. 

And, borrowing from the mining industry where the importance of safety is reinforced through a discussion at every board and management meeting, the department introduced “integrity moments” at the board meetings.

“Board members took it in turns to bring an issue for a 10 to 15 minute discussion that raised an ethical or integrity dilemma,” Ms Callister said.

“Initially these were quite concrete and sparked quite different views but over time they matured into deeper conversations which were linked to the culture and practice of the whole organisation. These have become part of the fabric of all management meetings in the department.”

Advice for other organisations 

Ms Callister said DET’s experience with corruption, and subsequent response, provided broader lessons for all leaders.

“I encourage leadership teams to define what ethical leadership looks like in terms of behaviours and attributes,” she said.

“You need to publicise your processes, and make sure there are avenues for someone to raise concerns about you,” she said.

“You can’t build a robust ‘speak up’ culture if you aren’t prepared to take action when you need to.

“Staff need to have confidence that consequences apply – and that the process is fair for all parties.”  

Ms Callister noted that integrity reform is initially seldom popular but perceptions can change over time.

“It implies change and in some cases, additional compliance and oversight. It can also be misinterpreted by some staff as ‘pointing the finger’ at those who weren’t to blame.

“We experienced this most sharply from principals when introducing the Speak Up hotline.

“Many saw the service as a new avenue for disaffected staff to make vexatious complaints about them – and in some cases, this was true. Our challenge became finding a solution that did more to screen these complainants while preserving the integrity and utility of the service.”

Ms Callister said that compliance and culture are equally important to building organisational integrity.

“Much is written about the role of leadership and there is no doubt in my mind that leadership behaviours are essential,” she said.

“But it is the weaving together of compliance – processes, procedures, accountability with culture that allows you to build a model of an ethically positive organisation.”