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Making of a fraudster – ripping off the Australian Public Service

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Women are fast catching up with men and increasingly committing serious fraud within the Australian Public Service (APS), a new report has found.

The Australian Institute of Criminology (AIC) investigated the most serious cases of internal Commonwealth fraud in its report, Fraud within the Commonwealth: A census of the most costly incidents, 2010 to 2013, released this month, and found that women made up 46.6 per cent of suspects in 2012-13 compared with 40 per cent being men.

A total of 7,809 incidents were reported by 137 Commonwealth departments or agencies over the three years and the report drills down into the 124 costliest cases, which are estimated to have cost the federal government almost $3.2 million.

All Commonwealth agencies are legally required to complete an online questionnaire about fraud and stipulate their fraud control arrangements, although a few did not bother.

One of the research paper’s aims is to build up a profile of APS occupational fraudsters by examining how and why the most costly fraud is committed and who is doing it.

Gaining a deeper understanding of what drives people to commit fraud and how suspects rationalise their actions can improve fraud control and prevention and deter those who may be at risk of committing fraud, or reoffending.

The AIC report said: “The evidence available from fraud profiling can be used to identify those at highest risk of offending who can then be provided with additional support and advice to help them to act honestly in the workplace.

“As with other areas of crime control, intervening at the earliest opportunity has considerable benefit in terms of reducing losses and harms and enabling otherwise productive employees to continue to pursue risk-free patterns of work.”

The revelation that female suspects overtook males in the final year of research contrasts to earlier research into public sector fraud, which normally identifies men as being more likely to commit fraud. While men tend to commit larger frauds, the largest single incident of fraud reported in this study was perpetrated by a woman.

But the AIC figures should be viewed in context. Many government agencies and departments failed to specify a suspect’s gender and the proportion of women working in the APS is relatively high, at 57 per cent.

Cases

One of the most serious cases of internal fraud, from 2012-13, involved a female employee aged 45-54 working at APS level 1-4 who swindled a Queensland government organisation out of $240,000 over five years by creating a fictitious identity. The woman got five years in prison without parole. Only $2,800 of this has been recovered.

Another case involved a man who stole nearly $130,000 of money – including petty cash – over almost four years and tried to cover his tracks using online accounting. The man was aged between 55 and 64 and lived in NSW. When confronted he admitted his crime but none of the money appears to have been recovered yet.

A female suspect employed at APS5/6 with a top secret security clearance, ran up $15,000 in one month on a government credit card without authorisation. The 35-44 year-old NSW resident was caught after an external audit and subsequent internal investigation. No money was ever recovered but legal proceedings remain incomplete.

In 2010, an ACT man employed at EL1/EL2 level, with a security clearance of “secret”, stole telecommunications and other government equipment by illegally accessing information held on a computer over six months. He was aged 45-54 and living in the ACT and at the time of the incident and had worked there for more than four years. The amount lost was $5,076, with $2,688 recovered.

Seven people were implicated in another case of internal fraud, where stock was stolen and government equipment misused by “manipulation of a computerised accounting system” and “other misuse of IT.”

The government organisation lost $15,638 and recovered only $64. The suspect had also accepted kickbacks and abused his power. The deception involved collusion between the principal suspect and six others and was referred to the Australian Federal Police for investigation.

How widespread is internal fraud in the APS?

Departments were asked to name one incident each year that had cost them most dearly and to give as much information as possible about the suspect: their age, sex, level of seniority, length of service and motivation for committing the crime. They were also asked what area the fraud was in, how it was committed and what action was taken.

The greatest single loss was $598,000 committed in 2012-13 by a woman who paid it all back. Other departments had less luck. One public servant netted just over half a million dollars but he paid back only $13,330. In 2012-13, a woman defrauded her work of $239,000. None of this money could be recovered.

Who is doing it?

According to AIC’s research, the average APS fraudster is male, works full-time, is aged between 25 and 34 and employed at APS 5-6 level. He lives in the ACT and has been employed for more than four years.

Public servants aged between 35 and 44 are the next most likely group to commit internal fraud; young people (under 25) and those over 45 are the least.

Although there were slightly more male than female suspects, this changed in 2012-13, where more female suspects were reported.

Prior fraud research has generally found that more men than women commit fraud. However, to get the whole picture, it is useful to note that Australian Bureau of Statistics labour force statistics indicate that the percentage of female staff went up and male participation dropped in the 2012-13 financial year.

“Generally most of the suspects were assessed as being of ‘good character’ with a high proportion having some level of security clearance,” said the report.

In 2011-12 the biggest group of suspects were employed at APS 1-4 (39 per cent) but in 2012-3 employees at APS Levels 5 and 6 made up 40 per cent of the suspects. Most had been in the job more than four years, indicating “that suspects had sufficient time to discover security weaknesses in management or other opportunities that could be used to perpetrate fraud.”

Interestingly, the research found that no senior managers were involved in the most costly 124 single incidents of fraud. This contrasts with other studies of internal fraud in the public sector, where fraudulent behaviour was detected at all levels of management and the most senior managers were responsible for the costliest frauds.

How and why is it happening?

The most common target areas for fraud were stealing equipment and fiddling entitlements and financial benefits and this was done most often by forging or altering documents. Failing to submit a leave application or falsifying one were also common.

The most frequently given motive that respondents attributed to suspects was “personal and family financial problems”, closely followed by “greed and desire for financial gain” but a high proportion of survey respondents said they simple didn’t know why the suspect had done it.

Other reasons advanced were: “to avoid staffing cuts”, the “belief it was common practice” and as “payback for unrelated alleged incident.” Other reasons put forward included drug and alcohol addiction, gambling problems and being unduly influenced by others.

Some thought suspects had not intended to commit fraud but had misunderstood the rules and done something accidentally, e.g. misusing a government credit card. Another respondent said a suspect’s medical condition was behind the crime.

How is fraud detected and dealt with?

Most crimes were detected by an internal audit, including by the colleagues of fraudsters flagging their duplicity. Other methods included a tip-off from a family member, staff self-reporting and irregularities found during the re-evaluation of an employee’s security clearance.

The most common outcomes were that the suspect was sacked or they resigned. Some were warned but kept their jobs. A handful of the most costly cases were referred to the police or for prosecution. Most people admitted the allegation in full when they were confronted.

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