ICAC provides guidance on the risks in undertaking internal recruitment

The Independent Commission Against Corruption (ICAC) recently published a report titled ‘Managing corruption risks in recruitment processes involving internal candidates’ following an investigation undertaken by ICAC into the financial assistance provided by a Chief Executive of a public authority to support internal candidates preparing applications for appointment to executive positions, and the Chief Executive’s role in the selection panel for those candidates.

While this incident occurred within a Public Sector setting, and the use of selection panels in local government is often limited to the selection of a chief executive officer (CEO), there are still key messages for our local government clients to take away from this report, which can be read in full here.

Background

A Chief Executive of a public authority approved the use of public funds to assist four internal candidates to engage external consultancies to prepare CVs and cover letters to apply for executive positions within the public authority. This was provided under the guide of performance development and coaching of the subordinate employees. Following a national recruitment process, the four candidates were successful in being appointed to the executive roles. A fifth internal candidate did not receive the same funding and was shortlisted for interview but not recommended for a position.

The Chief Executive was chair of the selection panel and a referee for each successful applicant. However, the other panel members were not aware of the funding provided to the candidates.

Findings and take home messages

Ultimately, the ICAC determined that there was no intention to unfairly favour any candidate and therefore there was no corruption. It is not the role of ICAC to consider whether any misconduct or maladministration occurred, and so this was not examined in detail in the report.

However, the ICAC was still critical of the giving of financial assistance to the internal candidates which had the appearance of an unfair advantage to those candidates (even if this was not the intention). The unfairness was amplified by the fact that the person approving the assistance was the chair of the selection panel. Accordingly, the ICAC made a number of recommendations as to how to ensure impartiality and transparency on selection panels.

In our view, these recommendations are relevant to our local government clients even though the use of recruitment panels is fairly limited in the sector. The use of selection panels is required in the recruitment of CEOs, pursuant to section 98(4) of the Local Government Act 1999 (SA) (LG Act). Although selection panels are not required for less senior positions, selection panels can still be a useful recruitment tool for a variety of positions within the local government context.

The report makes the following recommendations with respect to recruitment processes such as the one undertaken in this case:

• panel members must declare any conflicts of interests once the candidates are known, particularly where a candidate’s manager is part of the selection panel;
• there must be an established process for managing conflicts of interest;
• selection panel members should be required to declare whether they have approved any professional development activities for internal candidates within the previous six months;
• external, independent members should be included on selection panels, particularly for more senior appointments where there are internal candidates (and this is required for local government CEO selection panels pursuant to section 98(4a) of the LG Act); and
• selection panels should use alternative or additional referees where a selection panel member is the candidate’s line manager and referee.

Even where recruitment is not undertaken by way of a selection panel, these principles of transparency still apply. Relevantly, section 107 of the LG Act requires the CEO of a local government council to ensure that:

• ’selection processes are based on an assessment of merit, and are fair and equitable’;
• ‘employees are given reasonable access to training and development, and are afforded equal opportunities to secure promotion and advancement’, and
• ‘employees are treated fairly and consistently.’

In our view, offering ‘professional development’ opportunities to some but not all internal candidates may fall short of these requirements.

Accordingly, in our view, councils should have strict policies in place to address issues such as identifying the appropriate person to oversee the recruitment process, dealing with conflicts of interests and avoiding unfairly favouring particular candidates. We also note that ‘professional development activities’ like those considered in this case must be properly authorised and should not result in favouring certain employees over others in the context of any recruitment process.

Should you have any queries in relation to any matters raised in this article, please contact Sathish Dasan on +61 8 8210 1253 or sdasan@normans.com.au, Chris Alexandrides on +61 8 8210 1299 or calexandrides@normans.com.au or Annabelle Narayan on +61 8 8210 1292 or anarayan@normans.com.au.