The Victorian State Government this week announced a number of significant changes to the 2003 Standing Directions of the Minister for Finance.
The 2016 Standing Directions calls for stronger accountability to manage the risk of fraud and corruption by agency boards, CEO’s and CFO’s.
From 1 July 2016, it will now be necessary to immediately report significant and systemic incidents to your Portfolio Department. In addition, incidents of fraud need to be reported both internally (to an audit committee) and to the government (the minister, department and the auditor-general) together with remedial plans.
Whilst it is not mandatory for local Councils to adhere to the Standing Directions, it is good practice to consider and adopt industry benchmarks.
Critically, CEO’s and CFO’s are now personally accountable for strong financial management. Standing Direction 3.5 sets out the Governance requirements in relation to Fraud, Corruption and Other Losses. It makes reference to having fraud, corruption and other losses policy, recordkeeping requirements, as well as reporting significant or systemic fraud, corruption and other losses and having remedial plans for such.
These changes represent a significant increase in accountability and may test many organisations in terms of their preparedness. Boards and those charged with governance will need to ask the question; how ready is our organisation to comply with these requirements and how can our Board, CEO and CFO demonstrate that obligations have been met?
Immediate steps may need to be taken to identify gaps in existing fraud and corruption control frameworks: including the capacity of organisations to determine whether incidents of fraud and corruption are ‘significant’; how to prepare remedial plans; and reporting such to Audit Committees and Government.
The guidance to the 2016 Standing Directions recommends five areas of focus, policy, risk assessment, prevention and detection, response and audit. To assist you in the process our Forensic Consulting team has designed a number of useful questions to help you understand the requirements under Standing Direction 3.5.
