COI Watch: Do publicly-bankrolled businesses need more scrutiny?

Thanks to some highly-skilled reporting and the compulsion powers of a parliamentary committee, we finally have some idea of what’s been going on in a dark corner of the NSW government.

The state’s multi-billion dollar workers’ compensation scheme, icare, is a government agency that operates under the supposed oversight of the NSW treasury.

But its behaviour has been more akin to a big-end-of-town insurer, and the scandal has just claimed its first government scalp.

NSW Treasurer Dominic Perrottet’s chief of staff Nigel Freitas resigned last night over the “administrative error” that had ministerial staff paid for by the agency.

On Monday icare CEO John Nagle and four other senior officials were grilled in parliament over poor governance and conflict of interest issues.

It followed a joint investigation by The Age, The Sydney Morning Herald and ABC’s Four Corners that uncovered alleged mismanagement and the underpayment of as many as 52,000 injured workers.

Nagle resigned after the grilling, in which it emerged he had failed to properly declare his wife, who was at one point employed by icare, had been given a contract with the agency. He said he had “no idea” of the value of the contract, and couldn’t even recall his own salary.

As far as corporate scandals go, it’s a classic of the genre. But how did it happen inside a government enterprise and how do we stop it from happening elsewhere?

Worst of both worlds

Greens MP and committee member David Shoebridge says the problem is much bigger than icare. Government agencies around the country have for decades been under pressure to perform like their private sector counterparts. That’s resulted in inevitable conflicts of interest and a failure of accountability. 

“What we’ve seen with icare is the worst of both worlds,” Shoebridge says.

“High executive pay and bonus structures, typical of parts of the private sector. And job security and invulnerability that can be a feature of the public sector.”

Icare was set up by Perrottet in 2015 when he was finance minister. It was supposed to transform the state insurer into a lean, mean enterprise with a corporate can-do attitude. But Professor Alex Collie, director of the insurance work and health research group at Monash University, said this model — now typical of almost all workers comp schemes — has allowed conflicts to flourish. 

“What this shows is the way in which we design our workers compensation system is fundamentally flawed,” he said. “We run them as insurance schemes when what they’re trying to deal with is a health issue.”

Question of accountability

At a time when federal, state and territory governments are under even more pressure to turn agencies into publicly-bankrolled businesses, the icare scandal raises serious questions about the accountability of government agencies to their departments.

Perrottet has defended the icare board, saying it should be congratulated for the work it had done since it was established in 2015. That praise has been absent since Tuesday when it was revealed he had known about the conflict of interest involving Nagle’s wife for 18 months.

So who is accountable here?

“Ultimately it’s the government and the treasurer,” Unions NSW secretary Mark Morey said. “It’s his board, his organisation that he set up. And it’s a failure of oversight within government.”

Morey said the first thing that needs to change is how government boards are appointed. 

“Otherwise you get not a culture of independence, but a culture of coverup.”