IBAC releases report into Bendigo Health

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A report stemming from an investigation into Bendigo Health by the state’s Independent Broad-based Anti-corruption Commission has been tabled in parliament.

The commission made a number of findings implicating chief executive officer John Mulder and former construction manager Adam Hardinge, including that Mr Mulder “engaged in conduct contrary to the Victorian Public Sector Code of Conduct and Bendigo Health’s stated organisational values”.

The report which followed the investigation, dubbed Operation Liverpool, also identified “organisational and systemic corruption vulnerabilities at Bendigo Health that facilitated this conduct”.

Operation Liverpool findings against John Mulder

Operation Liverpool found Bendigo Health CEO John Mulder was provided with goods and services without payment, including the repair of floorboards and a downpipe, “significant” landscaping and painting at a Flora Hill property owned by his wife.

Other services obtained without payment included electrical work at a Spring Gully property where he lived at the time and the receipt and subsequent transport of a glass ambulance depot door to his property in Torquay.

The likely value of the goods and services provided to Mr Mulder in a private capacity is estimated to total about $10,000.

“Mr Mulder gave evidence that he expected to be billed for private works performed by Bendigo Health employees and contractors at his behest,” the report reads.

“Whilst Mr Mulder sometimes used words to the effect of requesting a bill, he was unable to satisfactorily explain what he meant by his use of qualifying words such as ‘it doesn't have to be a big bill, but needs to be something’.

“The natural meaning of such language by Mr Mulder, in context, was that he only expected ‘token’ bills for the sake of appearances, and not ones for true value.

“Further, for a number of years no bills or other documentation regarding salary offsets for such private works appear to have been raised or brought to Mr Mulder’s attention.

“Regardless of any requests he gave to Bendigo Health employees for him to be billed, Mr Mulder must have soon realised in that period he was not being billed or otherwise paying for the works in question, and was content for that to remain the case.”

Health minister Jill Hennessy released a statement condemning the behaviour as “uancceptable”.

She said the report would guide the government in putting in place measures to improve the integrity of health services across the state.

The report went on to say Mr Mulder did not show consideration for the correct use of employees, contractors and resources.

“It was only after Mr Mulder became aware of IBAC’s investigation that he directed Bendigo Health finance staff to identify work undertaken at the properties he rented since his appointment as CEO, and to send him pertinent invoices for payment.

“In addition to the concerns about cost involved, some of which was borne by Bendigo Health and some by its contractors, it is concerning that Mr Mulder did not appear to show any consideration or care for the use of Bendigo Health employees, contractors and resources for private purposes.

“It is also concerning that a range of work was undertaken at the Flora Hill property, which was rented by Bendigo Health from Mr Mulder’s wife.

“Whilst the rental arrangement was in place, it is difficult to see why the maintenance and improvement to the property was not payable by the landlord, Mr Mulder’s wife.

“IBAC was not persuaded by suggestions put by both Mr Mulder and his wife that this work was the tenant’s responsibility.

“The corrupt conduct allegations concerning Mr Mulder’s remuneration arrangements with Bendigo Health, which included receipt of ‘living away from home’ allowance while renting this property owned by his wife, were not substantiated to IBAC’s satisfaction taking into account the evidence that was able to be obtained and having due regard to the applicable standard of proof.

“Mr Mulder maintained in evidence that his actions were legal and involved an ‘arm’s length transaction’, relying on a Bendigo Health document authorising the rental through salary packaging and advices he had obtained more recently from two accounting firms.

“Whether these arrangements were consistent with the spirit and intent of applicable corporate policies and probity standards is a matter for Bendigo Health and the Department.

“The Victorian Public Sector Code of Conduct states that public sector employees must use their powers in a responsible way and not use them to provide a personal benefit to themselves, their families or associates. It also states that public sector employees must observe the highest standards of integrity in financial matters, including by maintaining a strict separation between work and personal financial matters.

“The code explicitly states that public sector employees must only use or authorise the use of financial resources or facilities for work-related purposes. Mr Mulder’s conduct is particularly concerning in light of his responsibilities as CEO.

“He effectively sent a message to staff that it was acceptable to use the health service’s resources for personal benefit.

“When asked in private examination whether the work he had done at various properties, and which was the subject of questioning, was improper, Mr Mulder conceded ‘in hindsight, yes, technically they were not consistent with the code [of conduct]’.”

Mr Mulder temporarily stood down as CEO in early February.

Operation Liverpool findings against Adam Hardinge

Operation Liverpool found former construction manager Adam Hardinge abused his position at Bendigo Health, particularly in relation to the enabling works for the new hospital

The commission found Mr Hardinge used Bendigo Health materials in renovations to his private residence without proper authorisation; arranged, without proper authorisation, for the sale of an electrical transformer that was the property of Bendigo Health to a contractor; arranged for more than $21,000 to be paid into his personal trust account, being the proceeds of scrap from the enabling works associated with the new hospital and consistently failed to comply with procurement processes, including failing to obtain the required number of quotes and raising purchase orders after the invoice had been received.

Mr Hardinge also agreed to quotes that contained insufficient detail and subsequently involved significant variations; prepared unauthorised RFQs and contractual terms that placed Bendigo Health at significant risk of liability should the integrity of buildings fail; charged personal expenses to projects associated with the new hospital; directed subordinates to take leave from Bendigo Health to work on his home renovation; breached probity by accessing documents related to the tender for the new Bendigo Hospital; exploited his position for personal gain – for example, by receiving hospitality from contractors and arranging for work to be undertaken at his home, as well as the homes of friends.

“It is considered that the conduct of Mr Hardinge over four years involved a lack of adequate oversight by his manager,” the report reads.

Mr Hardinge was effectively empowered to do as he pleased, behaving in a manner that was inconsistent with the Victorian Public Sector Code of Conduct and Bendigo Health values.”

Mr Hardinge’s manager resigned from his position at Bendigo Health in 2015. 

Recommendation stemming from Operation Liverpool

Following Operation Liverpool IBAC made the following recommendations:

Recommendation 1

That Bendigo Health thoroughly review its integrity and corruption prevention policies and procedures in the following areas to ensure the vulnerabilities identified in Operation Liverpool have been addressed, and that employees fully understand their obligations: a. code of conduct and values b. gifts, benefits and hospitality c. conflict of interest d. audit and risk management.

Recommendation 2

That Bendigo Health consider the introduction of a ‘declarable associations’ policy to require employees to identify, declare and manage associations that may be incompatible with an employee’s professional responsibilities.

Recommendation 3

That Bendigo Health thoroughly review the policies, procedures and practices in the following areas to ensure the corruption vulnerabilities identified in Operation Liverpool have been addressed: a. procurement b. asset management c. information security, particularly in relation to tendering information for major projects.

Recommendation 4 

That Bendigo Health review its training to ensure employees’ understanding of relevant policies and procedures. Further, that training specifically addresses corruption risks and ethical dilemmas, and is tailored for employees in identified high-risk positions (such as employees with responsibility for procurement).

Recommendation 5

That Bendigo Health confirm that all goods and services provided to Mr Mulder in a private capacity have been paid for in full.

Recommendation 6

That Bendigo Health report back to IBAC on action taken in relation to recommendations 1 to 5 by 30 September 2017. This report will be published on IBAC’s website.

Recommendation 7

That the Department of Health and Human Services consider the issues raised in Operation Liverpool and whether similar vulnerabilities could exist in other Victorian health services. The Department is to report to IBAC by 30 September 2017 on steps taken to address any such vulnerabilities in the broader health sector.

  • Read the full IBAC report below: