Half of all QLD’s local government fraud in one mystery council



A probe into the extent of fraud in Queensland local governments by the state’s Audit Office has found that a single council has managed to account for almost half of the alleged and confirmed rip-offs in the sector, prompting a referral to the Crime and Corruption Commission.

However the council is not yet being named publicly under Queensland’s provisions to prevent the use of corruption referrals as a form of vexatious mudslinging.

The audit report [PDF] found that while the state’s local government sector “experiences a significant level of fraudulent and corrupt activity” it was hard to accurately quantify how much fraud is going on because of poor record keeping by councils and “are inconsistencies in how, and to which authorities, fraud matters must be reported.”

Worryingly, the Queensland Audit Office also warned that spotting corruption in councils has become more difficult with a pointed reference to how council deals are awarded.

“Corruption is a significant threat to councils, but it is becoming harder to detect because of collusive behaviour between employees and suppliers. Councils have not developed the techniques they need to detect such activities early,” the Audit Report said.

In the case of the apparently aberrant local government, the Audit Office said it had performed detailed data analytics to identify potential indicators of other fraud and corruption at the council in question.

“Based on fraud indicators, we assessed the potential for further fraud and corruption at this council and formed a view that corrupt conduct may have occurred. In accordance with section 38 of the Crime and Corruption Act 2001, we referred our findings to the Crime and Corruption Commission,” the Audit report said.

The Audit Report found the most common types of fraud committed against councils was misappropriation of council assets, including theft, and “corruption by employees who use their position’s authority or their access to information for personal benefit.”

To get to the bottom of ratepayer-funded rip offs, the Audit Office has recommended that the state government through the Department of Infrastructure, Local Government and Planning change regulations governing councils to compel them to officially report losses stemming from fraud as well as keeping written records of allegations.

The level of alleged fraud in Queensland’s 77 councils is certainly impressive based on a survey of local governments by the Audit Office as well as fraud report statistics provided by the Queensland Police and the CCC.

The statistics reveal 5510 alleged frauds in councils were recorded in the five years from July 2009 to June 2014, a figure that neatly breaks down to an average of 1002 alleged incidents a year.

Notably, the Queensland Audit Office is not taking the fraud statistics provided by councils to it through a survey at face value, saying that “almost two-thirds of councils surveyed (63 per cent) claimed to have had no confirmed cases of fraud over the past five-years.”

“This is inconsistent with global research undertaken in 2014 which identified 41 per cent of government organisations experienced at least one instance of economic crime, including fraud, in the past two years,” the Audit Office said.

“Councils did not provide us with a fraud loss value for 58 per cent of their fraud cases; and 44 per cent of councils indicated they do not have a system to manage their fraud information,” the Audit Report said.

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