Misconduct in Public Organisations: Important Lessons for Businesses

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On 9 August 2023, the Victorian Ombudsman published Misconduct in public organisations: A casebook. The casebook examines seven real-world cases of misconduct substantiated by the Ombudsman through investigations. While the cases specifically involve public sector entities, the issues explored, like conflicts of interest, financial mismanagement, and failure to foster a culture of integrity, apply equally to private businesses.

One of the most common issues identified across cases was failure to properly manage conflicts of interest. In one example, the chair of a cemetery trust gave grave-digging work to their own private business, failing to recognize this arrangement as a conflict of interest. According to the Ombudsman, “conflicts of interest are poorly understood by many people in public roles.” The Ombudsman recommends all organizations “educate employees, volunteers and contractors about what a conflict of interest is and that having a conflict is not necessarily a problem – but hiding or failing to manage one is.”
Another significant theme was lack of financial oversight and control. In multiple cases, funds were misused because no one was effectively monitoring how money was being spent. For example, an employee was able to use school funds for personal sporting equipment by exploiting poor financial controls, submitting the expense without required details like an invoice number. The Ombudsman advises organizations to “have effective financial controls and systems for tracking spending so they can detect and prevent the misuse of funds.” In an era of increasing operational complexity and remote work arrangements, close financial monitoring is critical.

Failure to foster a culture of integrity was also cited as enabling misconduct. The Ombudsman noted, “the real reason so much public money was spent on inappropriate purchases was the culture at the organisation, which saw such behaviour as justifiable.” In a similar vein, “staff at the organization expressed varying views on this practice. One Director said it was part of the culture, that the employees’ union would ‘have a fit’ if they changed their practices.” Organizations must work to build a culture where misconduct is unacceptable, and staff feel empowered to speak up. According to the Ombudsman, “people in public organizations need clear and confidential avenues for reporting wrongdoing. This is especially important where there is an ingrained organizational culture of bending the rules.”

The Victorian Ombudsman’s casebook provides a valuable glimpse into common integrity failings and risks across organizations. By learning from the mistakes and missteps of others, businesses can strengthen their own programs to prevent and detect misconduct. Overall, the report underscores the need for clear policies, close oversight, a culture of integrity, and openness to feedback. These are lessons every compliance program would do well to heed.

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