Report 7

Fraud Prevention and Detection in the Public Sector

Background

In recent years there have been a number of high profile public sector frauds throughout Australia. Fraud and corruption can result in considerable financial losses to the agencies and organisations involved. In 2012 the New South Wales Audit Office conducted a survey and found that 48 per cent of agencies had identified fraud, with estimated losses amounting to $21 million over the previous three years. The Commonwealth Public Sector reported fraud costs of $498m in 2009-2010. The recent 2012 Global Fraud Study, conducted by the Association of Certified Fraud Examiners noted that “Survey participants estimated that the typical organisation loses five per cent of its revenues to fraud each year”. WA Police advised it is currently utilising 70 per cent of its fraud investigation resources on fraud and misappropriation on government and State service providers. In 2011-12 WA Police investigated approximately $23 million in public sector fraud.

By definition, fraudulent and corrupt activities involve deception and dishonesty. Not surprisingly these behaviours are difficult to detect and may go unnoticed for many years. While it is not possible to prevent all instances of fraudulent or corrupt behaviour, it is generally recognised that a coordinated and structured approach is the most effective way to identify and manage these risks.

We looked for better practice on controlling fraud and corruption and determined that the Australian Standard AS 8001-2008 Fraud and Corruption Control (the Standard) was the most appropriate tool to assess the effectiveness of agency preparedness.

Federal Government agencies as well as the Queensland and New South Wales State Governments are required under legislation to identify and manage fraud and corruption risks. In doing so, they are required to refer to relevant standards including the Australian Standard. This is an informative resource for the management of fraud and corruption for organisations. It requires development of a fraud and corruption control plan. Four key components of the plan are:

  • planning and resourcing
  • prevention
  • detection
  • response

Western Australian public sector agencies are not currently required to have specific plans in place to reduce the risk of fraud and misconduct. This was a requirement of the Premiers Circular 2005/02 Corruption Prevention, but was rescinded in November 2009. Agencies are now required to address fraud and corruption risks through their risk management processes, codes of conduct, and by training and awareness. Public Sector Commissioner’s Instruction No 8 requires that all public sector employees receive accountable and ethical decision making (AEDM) training. The training includes a module on fraud and corruption.

Page last updated: June 19, 2013

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