1. Introduction and background
1.1 Public accountability, a reputation for honest and efficient administration and the exposure of misconduct are key features of local government practice. The County Council has in place a variety of rules and procedures to help ensure the highest standards of conduct are practised by its Members, employees and those that it deals with; these are contained within the Constitution of Devon County Council and include Council Procedure Rules (Standing Orders), Financial Regulations and the Policy Statement on the Proper Conduct of Business (Good Practice Guide). However, malfunctions and irregularities may occur in any system. Most can be explained or resolved by double-checking or by involving a more experienced colleague, yet any one of them might be the first warning sign of a fraud or financial irregularity.
1.2 This strategy document sets out the procedures to be followed by any Member or officer following the identification of a suspected financial irregularity, which would include any act of theft, fraud, or corruption against the County Council or its clients. Refer to the appendix for more information regarding what constitutes a “financial irregularity”.
2. Notification of concerns
2.1 Devon Audit Services (DAS) has a duty to monitor instances of financial irregularities within the County Council as a whole, and to report certain details to external bodies such as the Audit Commission. It also has a duty to ensure that appropriate investigations are carried out. For this reason Financial Regulations require the immediate notification of a suspected or actual irregularity to the Head of Internal Audit (as detailed below).
2.2 All staff are required through their contracts of employment and the County Council’s codes of conduct to notify their Manager or a senior staff member responsible for personnel, as soon as he or she suspects that an irregularity has occurred. The Manager must, at the same time, inform Devon Audit Services (tel. 01392 382438; e-mail: “audit@devon.gov.uk”) and seek advice / instructions on further action. Similarly, any irregularity identified by DAS as part of its normal review function will immediately be reported through the same channels, to include the relevant HR Officer.
2.3 Employees are encouraged to contact DAS if they are concerned about any matter with a financial implication, but should be warned that a malicious or false complaint may result in disciplinary proceedings being taken against them.
2.4 It is vitally important that official contact is made immediately in the manner prescribed above and that any temptation to carry out initial investigations before doing so, is avoided. A strict and precise framework is required in the gathering and preservation of documentation and the carrying out of interviews with individuals, any of which may be needed for a court case. Internal audit and HR personnel will deal with these requirements in a professional manner.
2.5 In the event of a criminal matter being notified, DAS will consult with the Service Director, the Director of Resources and the County Solicitor so that a decision can be made on the nature and timing of police involvement (see Section 5).
2.6 It may not always be obvious, when confronted with suspicious circumstances, that an irregularity has been perpetrated. On the other hand complete sets of stores/equipment may be missing and funds totally unaccounted for, or an unsolicited confession or "tip off" may be received.
2.7 The County Council has issued a Good Practice Guide, which outlines a “whistleblowing” procedure for staff and Members. This is designed to protect the informant from reprisals (intended or otherwise) and, if possible, protect their identity, in compliance with the Public Interest Disclosure Act (1998). In the ensuing investigation a guarantee should be given that the matter would be treated confidentially, and an assurance that the informant’s identity would not be revealed without their approval. However, this could not be given if it was felt to be incompatible with a fair investigation; also, anonymity may not be possible in criminal cases.
3. Monitoring at Work
3.1 Internal audit staff have a role in monitoring the activities of employees in the event of any allegations of impropriety being reported. This could involve the covert monitoring of activities using electronic surveillance equipment or the monitoring/interception of electronic communications (e.g. e-mail, Internet, telephone usage).
3.2 Monitoring is a recognised component of the employment relationship and this is well publicised within the County Council’s ICT policies and guidelines regarding the acceptable use of its electronic and ICT systems. Within these documents clear warning is given that any unacceptable use or breach of policy may result in disciplinary action being taken against the person responsible.
3.3 In carrying out such work strict working practices are required to be followed, which include full observation of authorisations and protocols put in place to ensure that any actions are carried out both fairly and lawfully, safeguarding the rights of privacy owed to the individual. This is governed by legislation including:
3.4 In all cases of misuse reported to Internal Audit, a reasoned decision making process is required to be documented, showing the extent of any adverse impact on the employee in conducting covert monitoring, and ensuring that this is properly considered and justified by the benefit to the County Council. In such cases, any decision to go ahead with the exercise is subject to the independent authorisation of a designated Senior Officer, and is strictly time limited.
4. Action following reporting to Internal Audit
4.1 Senior Managers are responsible for following up any allegation of dishonesty, malpractice, fraud or corruption by:
4.2 Advice should be sought from HR Practice if there is any uncertainty in dealing with these matters.
4.3 As far as the local manager is concerned, the immediate concerns will centre around the way in which staff are dealt with and the manner of effecting any suspensions. Initially, the manager will need to establish if there appears to be any substance to the compliant/allegation. This may take the form of an exploratory interview. This would not be considered as a disciplinary interview within the disciplinary procedure, but depending on the apparent seriousness of the situation may include the attendance of internal audit and HR officers. If there is any uncertainty advice should be taken from HR/Internal Audit before following this course of action. The objectives of such an interview could be to establish relevant information and facts or to determine whether further investigation is needed. Either way, this will bring to the attention of the individual the allegation made against them, providing them with an opportunity to respond at an early stage.
4.4 The employee should be encouraged to be represented at this interview, which should cover the complaint/allegation, notification that an investigation will be carried out (if appropriate) and the likely timescale of this. If at any time during the interview any criminal act or activity becomes apparent, or the employee confesses to this, the interview must be suspended immediately to avoid compromising any future police investigation. Internal audit staff will have the necessary skills to deal with this situation.
4.5 If a formal investigation is considered necessary suspension (on full pay) would normally follow where this would allow a more objective examination of the circumstances, or alternatively, where serious misconduct or criminal activity is suspected; only designated officers can carry out a suspension. There may be exceptional circumstances where it is not practical to apply a suspension. On such occasions the senior member of staff at the establishment should have the authority to instruct an employee to leave work immediately and stay away until further instructed.
4.6 In the circumstances of suspension or a sending home there are specific notifications which need to be made or reports issued. Managers should, again, take advice from HR Practice to ensure that these are correctly applied.
4.7 Detailed instructions are issued by HR Practice regarding the steps to be taken in carrying out investigations within the disciplinary process. Under the direction of the investigating officer, HR staff are required to advise upon and follow the instructions laid out in their personnel manual. DAS must be involved in this process from the outset and should advise, assist and where appropriate take over the investigation. If required, its officers will have unfettered access to all senior officers within the County Council, without having to go through individual directorate management teams and will ensure that:
4.8 It is essential that secrecy is maintained both within and outside the organisation to help detect the offence, preserve evidence and secure assets.
5..Police involvement
5.1 A separate document entitled “Protocol for Police Involvement in the Investigation of Financial Irregularities” describes the agreed process by which the County Council’s designated officers will interact with the police in dealing with areas of suspected criminal activity. This document has been circulated to all personnel and audit staff.
5.2 As a general guide the police will be informed at an early stage in all cases which, following consultation, are regarded as being of a serious nature. Any criminal offence will be reported to the police and this may result in the employee being sentenced in a Court of Law. It is important therefore to have reasonable grounds for suspicion before recommending the first steps towards the road to disciplinary action.
5.3 Where an apparent irregularity arises between an employee and a third party the wishes of the third party concerning police involvement should be carefully considered and respected. Normally police involvement should only arise if that party is prepared to agree to it, but there may be occasions when the employer considers that it is obliged to involve the police. In this event, Senior Management and DAS, on the advice of the County Solicitor, should consider the involvement of the police.
5.4 An employee will not necessarily be subject to formal disciplinary action as a consequence of arrest, a charge or conviction for a criminal offence outside employment, although this may apply if the circumstances of the situation impinge in any way upon the individual’s employment position.
5.5 Where it is alleged or suspected that an employee has committed a criminal offence at work, then appropriate disciplinary measures must be taken. The designated officer must arrange for an investigation to be carried out and this will be regarded as separate from any investigation or criminal proceedings undertaken by the police. In these circumstances it will usually be appropriate for the employee to be suspended while the investigation is carried out.
5.6 At the conclusion of the investigation, if misconduct is still alleged or suspected, a formal disciplinary interview should be convened as soon as possible and should not be delayed to take account of criminal investigations or court proceedings. It is important that internal proceedings should not be delayed or depend upon the results of the police investigation, because the County Council’s interest relates to the member of staff’s employment and how the matter affects that relationship. Investigating officers will need to ensure that the obligations of the employer are properly balanced with the views of the police on the nature and timings of their investigation.
5.7 Any internal investigation should therefore proceed in parallel with its counterpart police investigation. However, in doing so, it is imperative that regular liaison is maintained with the lead police officer in charge of the case, to ensure that the criminal investigation is not jeopardised by contaminating evidence. The two parties should agree the scope, terms of reference, target dates and key issues affecting the case. Where priorities or timescales differ, organisational decisions have to be made about whose objectives take precedence (this approach is supported by employment law principles).
5.8 Appropriate communication should be maintained with the police; DAS or the nominated liaison officer may provide this when necessary to expedite progress. The County Council’s liaison officer is the Solicitor – Employment Lawyer within Chief Executive’s Legal Services. Accordingly, in all cases where it is proposed to take disciplinary action against an employee on account of alleged criminal activity, either at work or outside, these must be reported to Solicitor – Employment Lawyer (ext. 2323).
5.9 It is worth mentioning here that an employer does not need the same degree of evidence before deciding to dismiss an employee as would be required in a criminal prosecution. An employer only needs reasonable grounds to form a reasonable belief that the person has committed misconduct, breach of trust, abuse of authority or failure to comply with rules and regulations concerning his/her employment.
6..Further action
6.1 DAS will advise which persons should be informed about investigations within Devon Finance Services (DFS) and the Directorate concerned. (The number of persons so informed should be kept to an absolute minimum with managerial responsibility).
6.2 As far as DFS is concerned, it has been agreed that both the Head of DFS and the respective Principal Finance Manager (PFM) will be informed in general terms at the outset of a suspected irregularity. Thereafter, contact will be maintained throughout the investigation notifying the Head of DFS and the PFM of any significant developments.
6.3 DAS must also ensure that the relevant central services are informed where appropriate (e.g. Payroll, Payments, Revenue, Pension, VAT & Taxation Services). It is important that they are informed of employees or third parties suspected of financial irregularities so that consideration could be given to suspending payment of monies purported to be due or authorised by the suspects.
6.4 During the course of the investigation, particularly during the early stages, media and public interest may be high. All press enquiries must be dealt with in a controlled way. It is essential that the DCC Press Officer deals with this, ensuring uniformity in the release of information.
6.5 At the conclusion of the investigation any reports produced and information regarding decisions reached at disciplinary hearings will be communicated by DAS to the Head of DFS and the respective PFM, as well as to the Directorate Manager and HR Officer. Part of the investigating officers’ brief should be to ensure that any lessons learned regarding the perpetration of the irregularity are passed on to the appropriate staff within DFS and other Directorates.
6.6 Also, the recovery of any monies due to the Authority will be monitored by DAS to ensure that the Directorate concerned prepares a debtors invoice or insurance claim with the County Solicitor, where appropriate.
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