IGT’s report – no evidence of systemic internal fraud or corruption in the ATO – report prompted by ATO fallout following the high profile ‘Project Elbrus’ investigation – IGT made 13 recommendations to ATO & 1 to Government (all accepted, at least in part)

The Inspector-General of Taxation (IGT), Mr Ali Noroozi, has announced the release of his report into the ATO’s fraud control management. The review arose because of the concerns surrounding Operation Elbrus (a major phoenixing operation conducted by the son of a senior tax officer), including allegations of tax fraud that may be associated to abuse of position by a public official which lead to him resigning and being charged.

The review did not found evidence of systemic internal fraud or corruption. Generally, the ATO has sound systems in place for managing risks of internal fraud, however, the review has uncovered a number of areas which require improvement.

The IGT made a List of Recommendations:

• One to Government, which has advised that it agrees to implement this recommendation. This involves considering a “a broad review of the current arrangements for interagency collaboration for combatting tax fraud”.
• 13 recommendations to the ATO, which has also advised that it agrees in whole or in part with all of them.

The Recommendations to the ATO, include the following.

1. ATO controls to appropriately identify and manage conflicts of interest as inadequate management of such conflicts can lead to risk of corruption.
2. ATO officer intervention in individual cases.
3. Bolstering the independence of its Audit and Risk Committee by ensuring that the majority of its members, including the chair are external to and independent of the ATO;
4. Maintaining the role of the Integrity Advisor and enabling ATO staff to discuss ethical or fraud related concerns with him or her;
5. Conducting periodic reviews of its corporate integrity indicators and providing results and actions arising from them to the Commissioner;
6. Strengthening the ATO’s staff recruitment processes, ongoing checks and mandatory fraud awareness training to ensure its workforce maintains integrity and engenders continuing public confidence;
7. Acting on the advice, received from corruption risk experts, to improve its ability to detect internal fraud and corruption risks by such means as enhancing staff ownership of the risks;
8. Requiring staff to make contemporaneous notes of any requests made by one officer to another to access taxpayer information (so-called ‘access by proxy’);
9. Conducting periodic quality reviews of internal fraud investigations as well as the appropriateness of associated disciplinary actions;
10. Enhancing its analysis of behavioural events to assist in detecting serious misconduct; and
11. Increasing transparency of settlement processes.

There were a series of Appendices to the Report, also:

Appendix A – Terms of reference

Appendix B – Operation Elbrus

Appendix C – Other relevant reviews

Appendix D – Precious metals

Appendix E – Illicit tobacco trade

Appendix F – Panama Papers

Appendix G – Paradise Papers

Appendix H – ATO response

FJM 6.11.18

[LTN 203, 22.10.18; Tax Month – October 2018]

CPD questions (answers available)

1. Was a prompt for the review a high profile investigation called ‘Project Elbrus’?
2. Did this affect the ATO?
3. Did the IGT’s recommendation to Government, relate to ‘interagency collaboration’?
4. Did it agree to this recommendations?
5. How many recommendations did the IGT make to the ATO?
6. Did they include: better identifying conflicts of interests, independence of its audit committee, an ATO ‘Integrity Officer’; tackling ‘access by proxy’; and transparency of ‘settlement processes’?
7. How many did the ATO agree to, in whole or in part?