The Associated Press reports that police arrested Homestead, Fla., Mayor Steve Bateman last month on corruption charges for allegedly receiving US $125 an hour for consulting services provided to a health-care company that was seeking permission to connect a building site to the city's sewer system. The Miami-Dade County state attorney charges that Bateman lobbied city officials for the sewer connection without disclosing his relationship with the company. Bateman is one of three mayors in Miami-Dade County to be arrested in August and has been suspended from office until the charges are resolved. The other two mayors were arrested in a U.S. Federal Bureau of Investigation sting operation for allegedly accepting kickbacks in exchange for supporting federal grant applications.
Compromised ethical and business practices among public officials continue to be in the public spotlight at all levels of government. In turn, trust on the part of citizens in government, public officials, and public policies, continues to wane. So, what might be done, and what role can auditors play to help? A systematic strategy to address fraud committed by public officials should include at least these elements:
- To start, all public officials who carry out activities that concern the public trust ought to be subject to clear, comprehensive, and rigorous laws and standards that require avoidance of fraudulent or corrupt practices, as well as full declarations of any existing or potential conflict of interest related to their political positions. Fundamentally, an effective conflict of interest regime must require that public officials both declare and recuse themselves from any involvement in either recommending or deciding matters in which they have a material interest, whether ownership or an influential role. Such a declaration does not necessarily imply a material conflict, but it should be reviewed by an objective party. Increasingly, these regimes are being established to include all public officials at all levels, not just the most senior ones. Moreover, the most senior public officials must take additional measures, such as putting business assets into blind trusts during their time in office.
- Government jurisdictions also have had success in discouraging unethical practices by enacting laws and rules requiring public officials with private interests to declare their lobbyist activities publicly. The scope of such legislation or policy needs to include all senior officials with decision-making or purchasing authority — in countries such as Canada, it also includes lower levels of management officials. These measures also should include nonpublic officials who lobby on behalf of private interests. In this Homestead case, such a requirement might have forced the accused public official to declare his involvement at a much earlier stage.
- A whistleblower or equivalent policy and process also can be an effective anti-fraud measure, particularly where it applies to public institutions and officials. Often, officials are involved in complex, behind-the-scenes transactions and projects; in such cases, an insider may be the only good source of a tip that something is wrong with an official's behavior.
- A rigorous oversight system should be in place at the highest political level — such as a municipality — to regularly review and discuss information related to public fraud. A chief audit executive or equivalent executive should be tasked specifically with bringing forward public fraud information. Auditors should assess how anti-fraud measures are working in public institutions and recommend improvements. Where there are indications that fraudulent activity may be highly likely to occur, it also may be reasonable to require that the financial circumstances of at least senior officials be audited periodically. Such a review might have uncovered the fraudulent activity presented in this case.