The billions of dollars being raised and spent on school infrastructure come with a legion of probity and governance risks as the current Independent Commission Against Corruption (ICAC) Inquiry (Operation Landan) into the conduct of the former Chief Executive of School Infrastructure NSW (SINSW) highlights. 

The Inquiry serves as an important reminder of the importance of good governance for independent schools and government schools alike given the increasingly sophisticated nature of these projects and the money at stake. 

In this context, it is worth pausing to consider the scale of expenditure occurring.. In New South Wales alone, Counsel Assisting's Opening Statement for the Inquiry reports that the four-year budget allocation for school infrastructure surged from approximately $2.6 billion in 2016–17 to $6.7 billion by 2019–20. Independent Schools Australia reports that in 2022, capital expenditure in independent schools was $2.97 billion. 

Obvious probity and governance risks arise where infrastructure projects involving several millions are being proposed. 

It is in this context that ICAC's inquiry is examining allegations that the former Chief Executive of SINSW and others:

"(a) intentionally subverting appropriate recruitment practices to benefit friends and business associates; 

(b) improperly awarding contracts to friends and business associates; and 

(c) misallocating funds from school projects to favour particular businesses and to fund consultancy positions for friends and business associates."

The allegations detail large multimillion dollar payments to entities with key personnel close to the former Chief Executive.

Following a review of the allegations detailed in Counsel Assisting's Opening Statement, many of the issues under examination in the Inquiry could be avoided by adhering to the following good governance and probity principles:

1. Value for money: Contracts and hiring decisions should be based on merit and cost-effectiveness, not familiarity or convenience.

2. Clear lines of authority: Ensure there are appropriate delegations and proper oversight mechanisms in place to avoid one person or group of people taking control of the procurement decisions.

3. Transparent procurement: Competitive tenders should be used for significant contracts rather than direct negotiations. 

4. Conflict of interest management: Decision-makers should disclose any relationships that could influence procurement or hiring decisions, manage any conflict of interest properly, and recuse themselves from the decision making where necessary.

5. Respect for professional independence: Consultants should not be pressured to tailor advice to suit organisational preferences, nor should future work be tied to favourable reporting.

6. Fair employment practices: Redundancies and terminations should be free from any perception of reprisal or bias.

This is not to suggest that schools should avoid working with trusted contractors or consultants. Long-term relationships can offer valuable continuity and insight. But these relationships ought to be underpinned by a governance framework that ensures decisions are accountable, fair, transparent, and in the best interests of the school.

Although independent schools are not subject to the same public sector procurement principles or reporting to ICAC, improper governance or probity in the management of school infrastructure projects will nevertheless raise significant reputational issues for the school, as well as potential legal implications under contract and regulatory scrutiny by the bodies governing accreditation. Whilst trite to mention, a lack of probity will erode the trust of donors jeopardising future funding. The lessons emerging from Operation Landan should serve as a reminder for all education providers to review and strengthen their governance practices.

Should you wish to discuss this matter further or explore similar issues, please feel free to contact our Planning, government, infrastructure & environment team.