Report 7

Fraud Prevention and Detection in the Public Sector

Report Overview

There have been a number of high profile incidents of fraud and corruption in the Public Sector in recent years. The financial cost of fraudulent and corrupt activities can be large. Surveys conducted of the NSW and Commonwealth Public Sector suggest fraud can cost millions of dollars annually. In addition to the financial costs, fraud and corruption can cause serious reputational damage to an organisation and diminish public trust in executive oversight.

By definition fraud and corruption involves deceptive and dishonest behaviour and can be very hard to detect. Agencies need to be proactive in identifying their fraud and corruption risks, putting in place appropriate controls to mitigate them, and raising awareness amongst staff about the risks and how they are managed.

The Australian Standard on fraud and corruption control provides useful guidance for organisations on better practice for managing fraud and corruption risks. A key component of the Standard is developing a fraud and corruption control plan. The plan covers planning and resourcing; prevention; detection; and response. Federal Government agencies are required to refer to the Standard when developing fraud and corruption control plans.

In 2012, the WA Police raised concerns with the Auditor General about the level of public sector fraud incidents, which indicated that agencies’ approaches to minimising fraud and corruption were not effective. Western Australian public sector agencies are expected to manage all their risks including fraud and corruption through their broader risk management processes. Managing the risk can include a focus on awareness and training such as agency specific codes of conduct and accountable and ethical decision making training. We examined nine agencies to determine whether they had identified their fraud and corruption risks and established adequate controls and supporting better practice arrangements to minimise the risks. We also developed a maturity model to help agencies identify areas of concern or better practice, and inform management how the agency performed in addressing these risks.

Page last updated: June 19, 2013

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