Investigations into allegations of nepotism in government schools

Letter to the Legislative Council and the Legislative Assembly

To

The Honourable the President of the Legislative Council

and

The Honourable the Speaker of the Legislative Assembly

Pursuant to sections 25 and 25AA of the Ombudsman Act 1973 (Vic), I present to Parliament my Investigations into allegations of nepotism in government schools.

Deborah Glass OBE
Ombudsman

20 May 2020

Foreword

“ … hand on heart I can say I never ever heard the words conflict of interest in my whole career. I just never heard it. It was never mentioned, not once, in any forum that I’m aware of.”

– Australian Principals Federation officer of almost 40 years experience, in evidence to the investigation.

Regular readers of Ombudsman reports may well be wondering why we need another report into nepotism in government schools. But the better question may be: why does the Ombudsman continue to receive so many allegations about nepotism in schools?

The dangers of nepotism have been a theme of Ombudsman reports for many years, and I tabled a report in 2018 about the principal of a regional college which drew attention to the risks of this practice. The Department of Education and Training was also the subject of a major anti-corruption enquiry by IBAC; following this considerable scrutiny by integrity agencies it has built a comprehensive policy framework including detailed advice about conflicts of interest.

Despite this, complaints about nepotism in schools continue unabated. Troublingly, many investigations continue to find that jobs and contracts are given to the family members, associates or related businesses of principals or other senior school staff without their conflicts of interest being declared or managed.

This report looks at three such cases, all received since my last public report on the subject. They are not in the same class of misdeed as the principal who openly flouted the rules by hiring his wife, sons and other associates. These were not corrupt staff deliberately disregarding their obligations as public officers. Mostly, the subjects of these allegations were well-intentioned, busy people trying to solve problems, who got it wrong, such as not realising rules still apply to casual staff. They are anonymised in this report as I am not tabling it to expose them, but to draw attention to the problem and its consequences.

The cost to these individuals was high. Their actions led people to question their integrity. They found themselves facing what were no doubt distressing allegations and investigations. The suitability of their family members for the roles to which they were appointed was questioned. The inevitable effect is that confidence in merit-based decisions at the schools was compromised.

I recognise that the Department’s large, decentralised workplace raises operational challenges for any integrity program. Although the Department has had a conflict of interest policy for some 10 years, which it has continually updated, we found policies and guidance spread across multiple documents in multiple sites. It is not surprising that busy school principals, under enormous pressure of work, do not have a few quiet hours to explore the Department’s website – but it is disappointing that despite the money spent on professional development, training in ethical decision making is still needed.

Building a strong integrity culture - and effective ways of communicating what is right and wrong - requires more than policies on a website. I welcome the efforts by the Department both to develop and communicate its integrity framework, and I hope this report assists its efforts. My message to principals and others is simple: Leadership starts at the top. I would far rather not be using my precious investigative resources to investigate allegations of nepotism. If you can, avoid hiring your partners, children, friends or other associates. In any event, be aware of the rules - and the consequences of getting it wrong.

Deborah Glass
Ombudsman

The purpose of this report

1. This report draws attention to a problem that has become a regular subject of ‘public interest disclosures’ to the Ombudsman - nepotism in government schools. It highlights the need for school principals and staff to check and follow integrity obligations, and the need for public authorities to look for effective ways to embed integrity in their workplaces.
2. Since 2013, the Ombudsman has dealt with more than 20 cases where school principals or staff allegedly gave jobs and contracts to family members, associates or related businesses. Several investigations found that principals failed to declare and in some cases, manage, their conflicts of interest.
3. The Ombudsman tabled a report about one such case in 2018.¹ In that case, the Ombudsman found the school’s Principal:
   • employed his wife as his personal assistant, despite there being no record of her applying for the position
   • employed his son to manage an athletics program, even though there was a more qualified candidate
   • channelled benefits to companies owned by another son.
4. The cost of the Principal’s conduct was clear. His family and associates obtained substantial private benefits from public funds. His conduct affected the culture of the school and the careers of numerous teachers and staff.
5. The Department of Education and Training has been building a comprehensive policy framework on conflicts of interest since 2010. It provides detailed advice for principals and schools about declaring and managing conflicts of interest.
6. Despite this, the trend continues. This report discusses three recent investigations into allegations that school principals and staff gave jobs or contracts to family members. In these cases, the principals and staff may have been well-intentioned, but they underestimated the extent of their integrity obligations. Their experiences highlight the need for more work to raise awareness of conflicts of interest in schools.
7. The Ombudsman decided to table this report to draw attention to:
   • the risks for principals, school staff and other public officers who fail to attend to their integrity obligations
   • the Department’s work to address the problem, and what other public authorities can learn from its experience.

The rules on nepotism in government schools

8. Government schools, like other public authorities, are expected to manage public resources in the public interest. This includes ensuring:
   • employment decisions are based on merit
   • procurement of goods and services achieves ‘value for money’.
9. When principals and other school staff employ or contract services from family members and associates, it creates a conflict of interest between these public interests and the private interests of their families.
10. Public officers cannot always avoid conflicts of interest, particularly in small communities or specialist fields where qualified workers are in short supply. Public sector integrity rules therefore focus on the importance of declaring and managing conflicts. IBAC’s 2019 report on corruption risks and conflicts of interest noted:
    
    "While conflicts should be avoided wherever possible, the existence of a conflict of interest in itself is not necessarily a problem nor inherently corrupt … [T]he risk of corruption of occurs when individuals and their organisations fail to properly and actively identify, declare and manage a conflict in the public interest.²"
    
    
11. This section describes the rules on nepotism and conflicts of interest in:
    • public sector-wide laws and codes of conduct
    • school-specific policies and advice developed by the Department of Education and Training.

Public sector-wide rules

12. The Public Administration Act 2004 (Vic) aims, amongst other things, to promote standards of integrity and conduct for people employed in the public sector (section 3). It sets out seven public sector values (section 7), including:
    • integrity, which includes avoiding any real or apparent conflicts of interest
    • impartiality, which includes making decisions on merit and without bias, caprice, favouritism or self-interest.
13. The Victorian Public Sector Commission (VPSC) issues codes of conduct based on these values (section 61). School principals and staff are bound by the Code of Conduct for Victorian Public Sector Employees (the Code of Conduct).
14. Section 3.7 of the Code of Conduct provides high-level advice about conflicts of interest. It requires public sector employees to:
    • declare conflicts of interest
    • ensure their personal or financial interests, and the interests of family members, friends or associates, do not influence and could not be perceived to influence their performance in their job.

15. The VPSC updated the Code of Conduct in 2015 to include an additional requirement that public sector employees avoid conflicts of interest ‘wherever possible’ and ‘manage any conflicts of interest that cannot be avoided in accordance with their organisation’s policies and procedures’.
16. Failure to comply with the Code can lead to misconduct processes.

Departmental rules

17. The Department of Education and Training began supplementing the Code of Conduct with detailed school-specific conflict of interest policies in 2010 (see Table 1 below). It has updated and strengthened these policies over time. It has also published additional resources for schools. These include a 2015 ‘conflict of interest toolkit’, which contains practical resources to help employees apply conflict of interest policies to ‘real-world situations’.

Table 1: History of the Department's conflict of interest documents

Conflict of interest

18. The Department’s Conflict of interest policy restates the Code of Conduct’s advice that employees should avoid conflicts of interest that affect their public duties. Where a conflict is identified, it requires employees to take reasonable steps to protect the public interest.
19. The policy stresses the need for employees to speak with managers about conflicts of interest. It explains:
    
    "Because COI is inherently subjective and personal, individuals can be prone to underestimating or misrepresenting the extent of the influence a private interest might have. It is therefore critical that managers are involved in assisting employees to assess and address risks associated with COI."
    
    
20. The policy advises employees to declare conflicts to their line manager, and advises school principals to declare conflicts to their Regional Director in the Department.
21. The policy did not say how declarations should be made until 2018, when the Department added a declaration form to its eduPay human resources system. The Conflict of interest policy now requires employees to record conflicts of interests in this system, along with the steps they have put in place to manage the conflict. This obligation applies to pre-2018 conflicts of interest that are still relevant, as well as any new conflicts.
22. The policy lists recruitment and procurement as areas where risks of conflict of interest are significant. It notes school principals and business managers undertake these functions regularly and need to be ‘particularly aware of the risks’.

Employment of family members

23. The Department’s Recruitment in schools policy sets out specific rules for recruiting teachers and staff in schools. The policy states school principals are responsible for recruitment decisions, and for ensuring all parts of the recruitment process are completed correctly.
24. The policy’s basic requirements are:
    • Vacancies of six weeks or longer must be advertised.
    • The school principal must create a panel of three or more people to assess applications and recommend the best applicant.
    • The panel must provide a selection report to the principal with its recommendations and reasoning.
    • The principal decides which applicant to employ. If the principal disagrees with the panel’s recommendation, the reasons must be recorded.

25. The policy also requires principals and panel members to ‘avoid any actual, potential or perceived conflict of interest in the selection process, including the selection decision’. It cites ‘the employment of a family member or associate’ as an example of a conflict. It states that principals or panel members should:
    • remove themselves from the process if there could be a possible perception of favouritism or bias
    • declare any conflict of interest and the steps taken to manage the conflict.

26. The policy does not apply to recruitment of casual employees, or vacancies of less than six weeks. The Department allows schools to decide for themselves how to employ people for those positions.
27. From 2015, the Department provided more detailed advice about recruitment of family members in its conflict of interest toolkit.
28. The toolkit lists additional steps that school principals should follow when a family member applies for a role at their school:
    • The principal must notify the Regional Director (or their delegate) of the family member’s application once applications have been received, and before the selection process is undertaken.
    • The principal must not sit on the selection panel.
    • The panel must include another principal or staff member nominated by the Regional Director (or delegate). It cannot be comprised only of subordinates of the principal.
    • If the panel selects the principal’s family member as the preferred candidate, it must refer its recommendation to the Regional Director (or delegate) for decision instead of the principal.
29. Once a family member is employed, the toolkit states that principals must ensure they do not make decisions affecting their family member’s rights or obligations as an
    employee. In particular, it states principals should not make decisions relating to progression or salary, or those considered to provide a benefit or reward, to a family member employed at their school.
30. Like the Recruitment in schools policy, the toolkit does not refer to casual employment in schools.

Procurement involving family members or family businesses

31. The Department sets out detailed rules for procurement of goods and services in schools in its Procurement policy for Victorian government schools and School procurement procedures.
32. The documents require schools to obtain quotes when purchasing goods and services. The process varies depending on the cost (see Figure 1 below).

Figure 1: School procurement quote and tender thresholds

33. The Procurement policy for Victorian government schools states schools should ‘conduct procurement activities without favour for suppliers with whom there is a personal or familial relationship’. If a conflict of interest arises, the policy requires the affected person to take ‘all steps’ necessary to manage the conflict under the Department’s conflict of interest policies.
34. The Department’s conflict of interest toolkit discusses a scenario in which a principal engages a family member or friend for maintenance and landscaping work at their school. It warns the ‘mutually beneficial nature of the relationship between the principal and the contractor may lead to overcharging, or an overuse of the contractor’s services, or a reluctance to address issues with the quality of the contractor’s work’.
35. The toolkit advises the principal to:
    • declare their private interest (the nature of the relationship) as early as possible to the school council and record it in the school council’s minutes. It is not necessary in this case for the principal to declare their interest to the Regional Director in the Department, since the school council is the decision making body and the school councillors are not subordinates of the principal.
    • avoid participating in council deliberations over the contract
    • ensure periodic reviews of the contract.
36. The toolkit requires the school council to consider whether further steps are necessary to mitigate risks, such as seeking several quotes to ensure value for money, even where this is not required by other purchasing policies.

The three case studies

The Ombudsman's investigations

37. The three cases in this report were all referred to the Ombudsman by IBAC between December 2018 and February 2019. IBAC made the referrals pursuant to section 73 of the Independent Broad-based Anti-corruption Commission Act 2011 (Vic). IBAC had determined the matters to be ‘protected disclosure complaints’.
38. Following legislative amendments effective from 1 January 2020, the Protected Disclosure Act 2012 (Vic) was named the Public Interest Disclosures Act 2012 (Vic), and a protected disclosure complaint is now known as a ‘public interest complaint’.

Jurisdiction

39. The Ombudsman’s investigations were conducted under section 15C of the Ombudsman Act, which provides that the Ombudsman must investigate a public interest complaint, subject to some exceptions.
40. The Ombudsman Act allows the Ombudsman to investigate conduct in an authority or a public interest disclosure entity, which includes a member of the teaching service within the meaning of the Education and Training Reform Act 2006 (Vic). The Ombudsman therefore has jurisdiction over principals and assistant principals, who are employed as members of the teaching service.

How we investigated

41. The Ombudsman notified the Minister for Education and the Secretary of the Department of her intention to investigate the three matters between March and May 2019.
42. The investigations involved:
    • analysing relevant Departmental policies
    • obtaining documentary evidence from the Department regarding the relevant recruitment, employment and contracting arrangements
    • interviewing the school principals and senior staff members who were the subject of the allegations
    • interviewing other relevant department and school staff. In two cases, investigators interviewed the relevant Area Executive Director from the Department. In one case, investigators interviewed the school’s business manager.

43. All of the interviews were conducted under oath or affirmation.
44. In one case, investigators also spoke on the telephone with two other school staff with some knowledge of the matters under investigation.
45. The investigations were guided by the civil standard of proof, the balance of probabilities, in determining the facts of the investigation taking into consideration the nature and seriousness of the allegations, the quality of the evidence and the gravity of the consequences that may result from any adverse opinion.

Procedural fairness

46. At the end of the three investigations, investigators prepared detailed reports setting out the evidence and their preliminary findings. They included adverse comments about the principals of three schools, two assistant principals at one of the schools, and the business manager at one of the schools. In accordance with section 25A(2) of the Ombudsman Act, the Ombudsman provided those people with a reasonable opportunity to respond to the material in the reports.
47. The following case studies summarise the three investigation reports. They fairly set out the responses of the people who were the subject of adverse comments, where those people chose to respond.
48. The case studies seek to protect the identities of these people as much as possible by omitting names and other identifying details. This is consistent with the purpose of this report - to highlight the systemic issues rather than individual conduct.
49. In accordance with section 25A(3) of the Ombudsman Act, any other persons who are or may be identifiable from the information in this report are not the subject of any adverse comment or opinion. They are identified in this report as the Ombudsman is satisfied that:
    • it is necessary or desirable to do so in the public interest, and
    • identifying those persons will not cause unreasonable damage to those persons’ reputation, safety or well-being.

The role of the Department

50. The three cases in this report occurred in spite of the Department’s comprehensive policy framework on conflict of interest and nepotism in schools. All of the Principals were unclear about their obligations to declare a conflict of interest when hiring family members. They failed to make the required declarations at the time, and failed to document their plans to manage their conflicts. They often delegated recruitment and management of family members to subordinates, who may feel pressure to follow principals’ suggestions. Other school staff interviewed by investigators had not read the Department’s policies in their entirety, or at all.
51. The Department told investigators it has done more to communicate its policies since 2018, when these cases first came to light. This includes:
    • communicating about conflict of interest and the Department’s new eduPay declaration form through email bulletins and messages from regional leaders
    • introducing a conflict of interest e-learning module accessible to all employees through eduPay
    • presenting conflict of interest training through the state’s 57 Principal Networks (networks of school principals based on location)
    • launching a ‘Conflict of interest implementation project’ under the Department’s 2018-21 Integrity Strategy. The project includes a strategic engagement plan to support uptake of the Department’s conflict of interest register, focusing particularly on school principals.The evidence in these cases suggests the Department is also facing some systemic issues. To understand these issues, investigators interviewed a retired school principal with almost 40 years’ experience, who now works at the Australian Principals Federation. This office then wrote to the Department to bring these issues to its attention.
52. This section looks at the challenges facing the Department and its response to the three investigations.

Systematic challenges

Workforce challenges

54. The Department’s workplace raises some operational challenges for any integrity program.
55. First, it has a large workforce spread across the state. According to departmental data, it employed more than 75,000 employees in the teaching service in 2019 at more than 1,500 schools.³ Communicating integrity expectations to such a large and decentralised workforce presents some obvious challenges.
56. Second, the evidence shows that, for these employees, the rules around conflict of interest are still relatively new. The Department did not introduce its Conflict of interest policy until 2010. The Australian Principals Federation officer said he worked for the Department for almost 40 years until 2013 and:
    
    "hand on heart I can say I never ever heard the words conflict of interest in my whole career. I just never heard it. It was never mentioned, not once, in any forum that I’m aware of."
    
57. Third, investigators also heard that school principals are time-poor and under pressure at work. The Principals in the three cases described feeling overwhelmed by their responsibilities and said they worked long hours. One Principal told investigators they regularly work 12-hour days, as well as weekends. The Principals also discussed the various challenges their schools were experiencing, including recruiting staff who were qualified and willing to work with students with complex needs.

Policy complexity

58. Investigators observed that the complexity of the Department’s policy framework may be an obstacle for busy principals and school staff.
59. At the time this report was prepared, the policies and guidance were spread across 9 different documents, some of which had been updated multiple times. The documents are located on different parts of the Department’s website, including its ‘School policy and advisory guide’ page and the ‘HRWeb’ human resources page.
    One Principal commented at interview that the Department has ‘so much material on the system’.
60. The Australian Principals Federation officer described the Department’s online resources as ‘fantastic’ and ‘really clear’. However, he said:
    
    "The idea that at some stage [principals will] get a quiet couple of hours and they can sit and start to go through the Department’s website and see if there is anything that they don’t know about, it doesn’t work that way. They’re already working 60 hours. They’re tired. They only deal with the things that are right there in front of them.
    
    " … My view was, that when conflict of interest became an issue for the Department it was put on the website and it was good information on the website, but it wasn’t really - principals didn’t have a great knowledge of it."

Face-to-face training

61. IBAC’s 2019 report on corruption risks associated with conflicts of interest stressed the importance of ongoing training for all staff.⁴
62. The Department advised that, as of February 2020, 1,868 employees had completed its online module on conflict of interest. Although the numbers have been growing, this represents a small fraction of its employees.
63. The Australian Principals’ Federation officer told investigators that:
    
    "if we are wanting principals to understand things like this and really deeply understand it, you really need to sit in front of them … and explain it."
    
64. He said the Department’s conflict of interest workshops at Principal Network meetings were making a ‘dramatic difference’. He said that after one recent workshop, eight out of the 20 principals who attended the workshop contacted Federation or Department staff to ‘talk more about conflict of interest and how it applies to them’. He said this indicates ‘they don’t know a lot about it and they need some more help’.
65. The Department advised that, as of January 2020, it had presented this training program to 43 of 57 (75 per cent) of Principal Networks. It originally planned to deliver training to all Networks by March 2020, but training in some regions has been delayed because of the 2019-20 bushfires and the COVID-19 pandemic.
66. The three cases suggest assistant principals and school business managers would also benefit from training. They are regularly involved in recruitment or procurement in schools and are in a position to influence those processes for the better. However, the assistant principals in Case studies 2 and 3 did not do so in these cases. The Business Manager in Case study 1 did not identify that the hiring of the Principal’s partner created a conflict of interest.
67. The Department advised investigators that assistant principals attend Principal Network meetings and ‘we recognise the need to improve capability amongst that cohort’. It said the Department has also delivered conflict of interest training to five business manager network meetings and to the Business Managers Association.

Confusion about volunteer and casual employment

68. The three cases in this report also involved the employment of family members, at least initially, on a volunteer or casual basis.
69. The Department’s Conflict of interest policy requires principals to declare any identified conflict of interest to their Regional Director.
70. However, two of the Principals in this report believed, incorrectly, that they were only required to report a conflict of interest to the Department where a family member applied for a position that was subject to a selection panel, or where they made the decision to employ family members. They said this was because the conflict of interest toolkit prescribes steps where a family member applies for a role and there is a selection panel, but is silent on requirements for engaging casuals or volunteers.
71. The Department advised investigators that its training workshops for Principal Networks discuss casual recruitment.
72. The cases in this report suggest there is scope for further guidance about identifying and managing conflicts of interest for casual and volunteer roles. This is particularly important as these investigations show that volunteer and casual roles can be an entry point for paid regular work.

The Department's response

73. The Ombudsman raised the systemic issues arising from the three cases with the Department’s Secretary in January 2020. In response, the Secretary said:
    
    "The Department acknowledges the issues raised in the reports and agrees that the identification and management of conflicts of interest, particularly in schools, has been a long-standing challenge for the Department. Whilst we are continually working to improve awareness, which includes further work that is underway and planned, we are also open to suggestions on other strategies given the range of resources and supports that are available and the training we have undertaken."
    
74. The Secretary also outlined further work underway by the Department:
    • a new online Policy Advisory Library that gathers the Department’s policies and guidance in one central location, making them easier for principals and school staff to find. The Department is aiming to launch the Library in Term 2, 2020, subject to developments with the COVID-19 pandemic
    • resources and training for managers who receive conflict of interest declarations, so they understand what makes a strong conflict of interest management plan
    • updated online integrity training modules, which will be launched in 2020
    • an evidence-based evaluation of the Department’s conflict of interest register and its effectiveness in improving employees’ understanding of their obligations.

Conclusions

75. The three cases in this report were not cases of corrupt staff deliberately disregarding their obligations as public officers. They were cases of people who were trying to solve problems quickly, but in doing so underestimated their obligations to avoid, declare and manage conflicts of interest.
76. The cost to the individuals was high. Their actions led people to question their integrity. They found themselves facing what were no doubt distressing allegations and investigations. Additionally, the suitability of their family members for the roles to which they were appointed was questioned. Confidence in merit-based recruitment and procurement decisions at the schools was compromised.
77. This report has set out their experiences, not to expose the people involved, but as a reminder to all public officers of the consequences of nepotism and the importance of checking and following integrity obligations.
78. This report also shows that building a strong integrity culture requires more than policies on a website. This is an essential and relatively efficient way of communicating integrity rules. However, these cases show it is no guarantee that employees will read and understand their obligations.
79. The Department of Education and Training has put considerable effort into building a comprehensive policy framework and communicating those policies through training and other initiatives. The Victorian Ombudsman welcomes those initiatives and will continue to monitor their success in tackling nepotism in schools.