Anti-corruption body urges NSW department to watch for contractor ‘red flags’

ICAC issues finding of corruption against project manager

New South Wales’ Independent Commission Against Corruption (ICAC) has made 15 recommendations to the state’s Department of Finance, Services and Innovation, including that DFSI strengthen its screening of potential contractors.

The recommendations came out of an inquiry focused on the conduct of DFSI project manager Steven Prestage, who ICAC claimed had engaged in “serious corrupt conduct”.

ICAC today released its findings from Operation Yarrow, with the anti-corruption body alleging that Prestage had engaged in an elaborate scheme to deceive DFSI and dishonestly net himself more than $500,000 over a five-month period.

Prestage was engaged as a project manager to work on DFSI’s ‘Clarity Project’ (based on CA Technologies’ Clarity Project Portfolio Management application). ICAC’s investigation was sparked by a February 2017 report from DFSI’s secretary to the commission.

The commission’s report of its investigation states that during his employment by the department Prestage recommended that Petite Software Systems Pty Ltd be engaged to undertake work on the Clarity Project.

Petite Software Systems is owned by Michael Turner. However the company never performed any work for the department, ICAC said — instead, unknown to Turner, Prestage “hijacked” the name of the business, the commission’s report alleges.

“Mr Prestage ... used the name of Petite Software Systems to disguise the fact that another company, Petite Solutions Pty Ltd, was paid by DFSI in respect of the work carried out by ICT contractors on the Clarity Project purportedly on behalf of Petite Software Systems,” the ICAC report states.

Petite Solutions was under the “effective control” of the contractor, it adds, and registered under the name of Prestage's mother-in-law.

ICAC said that as a result of its investigations it was “satisfied that Mr Prestage had Petite Solutions registered for the purpose of securing payments made by DFSI for work carried out on the Clarity Project by ICT contractors”.

“He was able to secure payments to Petite Solutions by issuing invoices in the name of Petite Software Systems but which contained the bank account details of Petite Solutions,” the report adds. ICAC also claims that the contractor used a number of assumed names in correspondence between ‘Petite Solutions’ and the department.

ICAC said that the advice of the Director of Public Prosecutions should be obtained with respect to the prosecution of Prestage for a number of offences, including publishing false statements with an intention to obtain a financial advantage as well as offences relating to his conduct during the inquiry and procuring false testimony from a witness.

The anti-corruption body recommended that the DFSI ensure recruitment companies it engages “use better practice-checking methodologies when conducting reference and other checks of applicants.”

It also said that the department should develop a framework “to ensure that the employment screening checks conducted of contractors are commensurate with the level of risk posed by their respective engagements.”

Another recommendation would see a specialist business unit established to manage the department’s engagement of contractors. Other recommendations included better systems for reporting and escalating “red flags” related to projects, procurement activities, and invoices.

A spokesperson for DFSI said the department “acknowledges the serious issue raised in the Independent Commission Against Corruption (ICAC) report.”

“DFSI has already  significantly strengthened its control framework since  becoming aware of the issue, and proactively reporting them to ICAC for investigation,” the spokesperson told Computerworld.

The department accepted the commission’s recommendations and has incorporated most of them into its business operations, she said.

Measures taken include rolling out a centralised software platform, Contractor Central, to manage and monitor contingent labour hire across the broader finance cluster, and introducing “more rigorous ICT project governance”.

A formal ICT Capital Review Board, chaired by the secretary and with deputy secretary, CFO and CIO membership, now considers all project business cases before they are approved for delivery, the spokesperson said.

In addition the department has strengthened the process for engagement or extension of contractors to improve transparency, and to reduce cost and compliance risks, she added.

“Better processes have been introduced to support staff dealing with procurement and invoice processing to identify, raise and resolve red flags, issues and errors,” the spokesperson said.

Project Clarity has been “successfully completed”, and the project management system is now in use across the department and has “delivered real value in improved delivery results.”


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Tags governmentNSW GovernmentIndependent Commission Against Corruption (ICAC)New South Wales (NSW)

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