The Tell Tale Signs of Regulatory Decay

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The Tell Tale Signs of Regulatory Decay

• Peter Cantwell
• LLB (Hons), Solicitor, Assistant Ombudsman
• Cady Simpson
• LLB, Solicitor, Investigator
• Officers of the Queensland Ombudsman
• October 2006

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Publications about regulatory compliance

• Better Decisions Project
• Workplace Electrocution Project
• www.ombudsman.qld.gov.au

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Favourite quotes about the failure of regulatory
compliance

• Nothing was done. That is because the
  authorities were inclined towards inaction. When
  nothing happened, that encouraged the
  perpetrators to do it again. Others saw what was
  happening and that there were no detrimental
  consequences. So they followed suit.

• Ian Temby QC, Royal Commission into
• the Finance Broking Industry (WA), December 2001

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Favourite quotes about the failure of regulatory
compliance

• It is said that when the cat is away, the mice
  will play. In this case, the cats were
  slumbering and the mice played havoc.

Ian Temby QC, Royal Commission into the Finance
Broking Industry (WA), December 2001
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1. Lack of investigative planning

• Effective investigative procedures require
  officers to properly plan their investigations.
  Investigative planning is critical to the success
  of any investigation. An investigative plan is
  the primary planning tool available to an
  investigator. It is essential that such a plan
  is prepared before an investigation of any
  complexity is commenced.

David Bevan, Queensland Ombudsman, Workplace
Electrocution Project, June 2005
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1. Lack of investigative planning

• Care and attention spent in getting it right at
  the outset will avoid considerable difficulties
  later on.

Bruce Barbour, NSW Ombudsman, Investigating
complaints a manual for investigators, 2004
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1. Lack of investigative planning

• Why investigative planning?
• Clarify the nature of the complaint or what is
  being alleged and what the issues for
  investigation are
• Set out the terms of reference or scope of the
  investigation and its objectives
• Ensure that the objectives are relevant,
  achievable and within jurisdiction
• Set out the steps the investigation should follow
  to ensure that it is conducted in a methodical
  and professional manner
• Identify the potential avenues of inquiry
• Identify the resources required to conduct the
  investigation
• Identify any opportunities for persons to remove,
  destroy or alter evidence and ways of minimising
  those opportunities
• Identify any potential problems investigators may
  encounter in making their inquiries
• Identify any potential problems investigators may
  encounter in making their inquiries

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1. Lack of investigative planning

• Identify what, if any, redress should be provided
  for anyone who has suffered detriment as a result
  of the conduct being investigated
• Allow the investigator to stay focused on the job
  and alert them to any potential problems prior to
  encountering them
• Facilitate effective supervision by informing
  advisors to investigate strategies and timelines
  to be met during the investigation
• Be in a standard format that is flexible enough
  to be adapted for different types of
  investigations
• Identify any relevant legislation, regulation,
  code of conduct or standard benchmarks
• Identify the elements of any potential offences
  or defences
• Identify whether public interest disclosures have
  been made under whistleblower legislation
• Canvas potential findings
• Be regularly reviewed and able to be easily
  amended with the requisite approval

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Matter requiring investigation

• You are the corporate services manager for a
  government agency. You are responsible for
  approving major equipment purchases for the
  agencys four work locations.
• Jay, an administrative officer tells you Rowan,
  the agencys operations manager recently favoured
  a consultant when purchasing technical equipment
  for the agency. Jay alleges that Rowan wrote the
  tender specifications so narrowly that only one
  supplier could meet the agencys needs. The
  supplier was an engineering consultant who was
  used regularly by Rowan to provide engineering
  services and who had recently set up business as
  an equipment supplier. Rowan chaired the
  selection panel and recommended that the former
  consultants bid be accepted. Jay has recently
  seen a confidential fax message sent by the
  consultant to Rowan and suspects Rowan now has a
  personal interest in the consultants business.
• You are concerned because you are the delegate
  who approved the contract.
• Substantially extracted from Investigating
  complaints a Manual for Investigators, NSW
  Ombudsman, 2004

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(No Transcript)
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2. Poor record keeping

• Every regulatory system must give prominence to
  the need to make and keep appropriate records.

David Bevan, Queensland Ombudsman, Workplace
Electrocution Project, June 2005
Similarly, there are serious risks for agencies
that fail to properly document their decisions
and decision-making processes.
Better Decisions Project, a joint project of
Queensland Ombudsman, Department of Tourism, Fair
Trading and Wine Industry Development, Department
of the Premier and Cabinet, 2005
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2. Poor record keeping
Legislation, standards and guides

• Public authorities required to make complete and
  accurate records Public Record Act 2002 (Qld)
• Information Standard 40 Record Keeping,
  Queensland State Archives
• Best Practice Guide to Record Keeping, Queensland
  State Archives

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2. Poor record keeping
Benefits of good record keeping

• Improve decision-making
• Ability to prepare a statement of reasons
• Explain how particular decisions were made
• Allows records to be audited
• Enhances transparency and accountability
• Assists FOI decision-makers
• Protects officers from unwarranted criticism

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2. Poor record keeping

• What we have found
• Incomplete and fragmented records
• Records not contemporaneous and separate
• Unprofessional records-inappropriate email
  traffic between officers
• Irrelevant personal opinions and value judgments
• Recorded prejudgments by officers who were not
  authorised or delegated to make decisions
• Unattached circulating paper records
• Inappropriate use of post-it notes
• Facts and legislative basis not recorded
• Opinions not accompanied by any explanation of
  the basis on which the opinions were held
• No reasons for decisions-only outcomes

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2. Poor record keeping

• Outcomes v reasons
• The evidence died with the worker
• The incident was due to circumstances over which
  there was no control
• There was likely operator error
• It is considered unlikely that sufficient
  evidence to support a successful prosecution
  could be gathered
• Despite a detailed investigation, insufficient
  evidence was gathered to support a breach of any
  legislation administered by this department
• NFA-Agency otherwise satisfied
• The evidence has been reviewed. We do not
  consider it appropriate to pursue the matter any
  further.
• you should pursue your own remedies

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Memo of a telephone call

• Received phone call from Theo Kotaris, he is
  about 85 years old and a very erratic individual.
  He was complaining about the application he had
  lodged seemed pretty upset with no good reason.
  Said he had been waiting for a letter from us for
  over 6 months. Had to work out what he wants as
  he is a bit deaf and speaks with a heavy accent.
  He seemed rather confused about what was
  happening with his application. I tried to tell
  him that the relevant officer handling the
  application was on leave and that he needed to
  speak with him, not sure if he understood my
  advice. From what I know of his application,
  there is no chance of it being approved.

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Memo of telephone call

• Received phone call from Theo Kotaris, he is
  about 85 years old and a very erratic individual.
  He was complaining about the application he had
  lodged seemed pretty upset with no good reason.
  Said he had been waiting for a letter from us for
  over 6 months. Had to work out what he wants as
  he is a bit deaf and speaks with a heavy accent.
  He seemed rather confused about what was
  happening with his application. I tried to tell
  him that the relevant officer handling the
  application was on leave and that he needed to
  speak with him, not sure if he understood my
  advice. From what I know of his application,
  there is no chance of it being approved.

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Memo of a telephone call

• TI THEO KOTARIS re application for building
  approval CCC 1698/05
• He expressed concern about delay, claimed been
  waiting six months, had expectation he would have
  received response
• Advised him that I would leave message for
  officer KJ to contact him
• CJ 14 May 2005, 9.21am

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3. Lack of prioritisation and risk management

• Prioritisation is an essential component of
  compliance work because investigation and
  prosecution resources are finite and, as a
  general rule, a regulatory agency needs to
  consider how it can best devote resources firstly
  to very serious cases, secondly to less serious
  cases and thirdly to those cases where
  commonsense dictates that a less formal process
  would be appropriate.

David Bevan, Queensland Ombudsman, Workplace
Electrocution Project, June 2005
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3. Lack of prioritisation and risk management

• Risk Management AS/NZS 43602004 provides a
  generic guide for managing risk and is
  applicable to the prioritisation decisions of
  regulators. HB 436 Risk Management
  Guidelines-Companion to AS/NZS 43602004 contains
  specific guidance on the implementation of the
  Standard. The two documents are intended to be
  used together.

David Bevan, proposed report- Best Practice in
Regulation-The EPA Case Study
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3. Lack of prioritisation and risk management

• A regulatory agency that takes a risk
  management approach to its enforcement activities
  will prioritise all notifications of alleged
  legislative breaches according to a formula,
  scale or model. A typical model requires various
  weighted factors to be taken into account before
  a notification is investigated.

David Bevan, Queensland Ombudsman, Workplace
Electrocution Project, June 2005
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4. Poor corporate communication

• It is well established that effective
  communication with clients, staff and other
  stakeholders enhances the ability of an agency to
  successfully carry out its functions and to
  achieve its goals. In the context of the public
  sector, it is also clear that the community
  expects to be able to communicate freely, easily,
  and meaningfully with agencies and
  decision-makers

• David Bevan, Queensland Ombudsman,
• Workplace Electrocution Project, June 2005

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4. Poor corporate communication
Best practice A regulator must manage
expectations of complainants, regulated industry,
co-regulators, public

• Acknowledge complaint, update as to progress and
  advise of outcome
• Manage requests for confidentiality-third party
  dob in information
• Anonymous complaints
• Publish enforcement philosophy and practices

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5. Lack of supervision

• An appropriate supervisory structure is an
  important component of any good decision-making
  system. A best practice investigative process
  for a regulatory agency generally employs a
  multi-tiered approach to decision-making.
  Officers at each level are required to bring a
  different perspective to the issues in question
  and each officer is expected to make an important
  contribution to the overall process.

David Bevan, Queensland Ombudsman, Workplace
Electrocution Project, June 2005
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5. Lack of supervision

• Many levels of expertise add value to work as
  a regulator

• Problems
• Managers adopting officers opinion without
  critical analysis or value adding
• Post-it note instructions/comments e.g. noted
• No managerial response at all in some cases
• When managers did express view, no reasons given
  for that view
• Content free managers lacking investigative
  experience
• Over-emphasis on timely investigations e.g. speed
  rather than quality
• Driven by file closure targets
• Blame the victim/somebody else approach
• Use of legalistic phrases that suggest
  significant activity

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6. Lack of training/manuals

• Any good decision-making framework should make
  provision for the proper training and development
  of officers to ensure they have the skills and
  expertise to perform their functions
  competently.

David Bevan, Queensland Ombudsman, Workplace
Electrocution Project, June 2005
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6. Lack of training/manuals

• Lack of training/manuals about

• Record keeping
• Investigative practices
• Communication
• Enforcement philosophy and practices
• Legislation and available enforcement measures
• Proactive compliance activities

• Problem
• Failure to appreciate that their primary task as
  a regulator is to identify the truth about an
  alleged breach of the law and not to seek at the
  outset to either implicate or exonerate any
  person or entity

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7. Regulatory capture
Regulator and industry build working
relationships that have the potential to lead to
the regulator becoming unwilling to perform its
compliance tasks diligently and impartially in
respect of that industry so as to avoid
jeopardising the relationship. Characteristics

• Small regulator
• Limited resources
• Trade/technical qualifications only/limited
  investigative experience
• Unsupported investigations-low profile
• Lack of leadership

• Large industry
• Significant resources
• Access to top shelf legal advice
• Essential services/significant contribution to
  Gross Domestic Product-State or national profile
• Significant employer/strong corporate leadership

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7. Regulatory capture

• Watch out for
• Excessive secondment creep by officers between
  regulator and industry
• Executive mobility between regulator and industry
• Joint sponsorship-the creation of one public face
• Increasing use of informal or oral warnings and
  acceptance of informal or oral undertakings to
  rectify based on personal relationships which may
  not be documented
• Regulator rushing to judgment to support industry
  practices in response to media or political
  contact

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8. Inadequate legislative scheme/poor policy

• Licensing and education are easy, enforcement is
  hard
• Problems
• Multiple and overlapping jurisdiction-two or more
  agencies-who has lead role?
• Legislation complex and confusing for regulators
  and regulated
• Intent of policy not clear-obstacles to efficient
  work practice
• Perception that it is easier and safer to do
  nothing rather than take enforcement action and
  fail

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9. Inefficient organisational structures

• Reality
• Queensland geographically large and diverse
• Consider
• Must be conducive to effective performance of its
  responsibilities
• Simplify reporting relationships
• More accountability for each level of management
• Direct line management responsibilities between
  state office and the regions
• Provide discrete budget allocations and
  devolution of control to regions?

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10. Integrity of regulatory system

• Principles
• Regulators should be left to assess and
  investigate free from external direction or
  inquiry during the investigative phase
• Decision whether or not to institute proceedings
  for breach should not be governed solely by
  considerations of cost, convenience or political
  expediency
• Regulators should be able to provide sound
  explanations as to why no enforcement action has
  been taken

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ExcusesThe R wordresourcing

• Expected to do more with less
• Resourcing is not an excuse when improvements can
  be made to
• Investigative planning
• Record keeping
• Prioritisation
• Corporate Communication
• Supervision
• Training/manuals
• Strategies to avoid regulatory capture
• Legislation and policy
• Organisational structure
• Integrity of regulatory system

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• Questions welcome