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The great Commonwealth robbery: Govt swindled out of $1.2 billion

 

Commonwealth departments and agencies were swindled out of $1.2 billion between 2010 and 2014 with almost 8000 of the fraudsters working in the public service.

The Australian Criminology’s (AIC) Fraud against the Commonwealth: Report to Government 2014, found that roughly one-third of all agencies reported being cheated over the survey’s four years and 7900 of those cases were internal fraud committed by staff or contractors.

But this figure was dwarfed by the scale of external fraud. Members of the public that cheated the Commonwealth accounted for 99 per cent of the cases and $1.19 billion lost.

The four-year fraud census also found that the number of fraudulent grabs for cash increased from $119 million in 2010-11 to $673 million in 2013-14, a huge jump of $554 million, or a leap of 450 per cent.

But the AIC pointed out that the fraud blow-out was mostly due to the efforts of one large Commonwealth agency to quantify fraud for the first time, beginning in 2013-14.

Larger Commonwealth agencies and departments with more than 1,000 staff were the most likely to experience fraud, 54 per cent said they had. Smaller organisations of less than 500 staff accounted for just under one-third of incidents reported. Medium-sized entities chalked up the lowest fraud incidents.

What’s worse is that most fraudsters got away with it. Only $75 million was recovered or 6.3 per cent of the money. Those who were caught tended to avoid a custodial sentence.


Internal fraud

There were 9467 cases of internal fraud over four years, which amounted to a $12.7 million gouging of Commonwealth cash.

The most common was obtaining financial benefit with public servants involved in: obtaining cash without permission; stealing or misusing a government credit card; falsifying documents; stealing or misusing a Cabcharge; stealing property, other than cash and misappropriating grant money.

The most common methods of internal fraud were falsifying documents for financial advantage; misusing government credit cards or obtaining cash without permission. The biggest losses were from public servants playing fast and loose with government credit cards.

The AIC notes that the greatest risks to internal fraud were inadequate or out-of-date internal controls, poor recruitment practices, lax risk management and insider threats, which is where staff are compromised or groomed by external parties.

But despite the dodgy behaviour of a number of public servants there was a significant drop in the number of incidents of internal fraud reported, which fell from 3,828 incidents in 2010-11 to 1,658 in 2013-14: a 57 per cent reduction.

The AIC said the drop represented a large reduction of incidents in a handful of agencies and departments, rather than a reduction across the board.


External fraud

The most common external fraud was members of the public fraudulently claiming government entitlements.

Frauds in this category – mostly revenue fraud, visa or citizenship fraud and social security fraud – more than tripled, from 52,127 incidents in 2010-11 to its highest point of 170,756 in 2011-12. By the final year of the four-year census, it was down to 110,698.

The next most common fraud was information-related, which affected between 14 to 19 per cent of organisations across the four years.

The AIC report said that the risks of external fraud tended to be exacerbated with new benefits coming onstream; the introduction of new taxes; poor procurement practices; badly managed government-funded programs and inadequate monitoring of consultants.

Misusing documents was the most common way to execute fraud but misuse of identity was up substantially, more than quadrupling between 2010-11 and 2013-14, from 17,152 in 2010–11 to 79,561 in 2013–14.


Catch a thief

Of the almost 176,000 people suspected of dudding the Commonwealth over four years, only 5891 were charged and convicted.

The most common punishment – meted out in one-third of the cases – was a recognisance order, like a good behaviour bond. Around 45 per cent defendants received non-custodial sentences, including suspended sentences and community service. Ten per cent were slapped with a fine.

The numbers receiving custodial sentences were fairly low but have increased from 9.3 per cent of cases in 2010-11 to 16 per cent in 2013-14.

Most of the stolen money was recovered by administrative means, narrowly followed by criminal proceedings. Civil recovery and other proceedings were less common. Only around 3 per cent of cases were referred to the police or other organisations for investigation.

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