Public sector fraud in NSW has more than doubled in four years, with fiddling timesheets and stealing petty cash being the most common infractions.
There were 1077 cases of fraud reported by the NSW agencies to the NSW Auditor General between 2012 and 2015, more than twice the number of cases than were reported in the most recent, similar survey, where 562 cases were reported from 2009 to 2012.
Almost all cases involved internal perpetrators (92 per cent) and the most common method of detection were tip offs and through managerial reviews.
The frauds cost the NSW government $10 million between July 2012 and June 2015 and while most frauds were under $10,000, 24 frauds cost the government $100,000 or more and one incident accounted for a whopping $1.7 million loss.
It will come as little surprise that procurement and contract management fraud caused the heaviest losses, with each case costing an average of $225,000 all the way up to $1 million and $1.7 million.
Typical scams involved submitting invoices for work never done, inflating invoices for more work than was actually done or invoicing for non-existent work done by non-existent companies. Other incidents included contractors and consultants falsifying timesheets and creating records for goods and services that had never been delivered.
The report revealed that the most common profile for a fraud perpetrator was male, 46-years-old and non-managerial who had been working in the operations area for more than five years.
Although middle managers were less likely to commit fraud, they caused much more serious losses to NSW government agencies, netting an average of $138, 314 compared with $7,228 for non-managerial staff.
The most common drivers identified were being under financial stress and overspending, being too close to vendors or customers, being a control freak and having a ‘wheeler dealer’ attitude.
Although the magnitude of fraud may seem high, the Auditor General’s report said that this figure could be the tip of the iceberg because unreported fraud could be up to three times greater.
Of the 102 NSW government agencies surveyed (which did not include local councils or universities or fraud such as fare evasion or fraudulent state tax self-assessments), a similar number reported fraud to the 2012 survey, with 44 per cent of agencies reporting fraud, compared to 48 per cent in the 2012 survey.
But while agencies believed their fraud control was improving, the report said they tended to focus more on passive rather than proactive fraud control measures, not always bothering to ask staff for annual conflict of interest declarations or asking them to regularly sign the code of conduct. Nor did many of them publish gifts and benefits registers.
Fraud control plans and fraud risk assessments were also an area where substantial improvements were needed, said the Auditor-General.
The Auditor-General recommended agencies should:
- Regularly review their fraud control measures against the Audit Office of NSW’ Fraud Control Improvement Kit
- Refer to the ‘fraud control in the NSW public sector’ section of the report which identifies areas where agencies found weaknesses in their fraud controls when comparing them against the kit
- Review their procurement processes
NSW Treasury should develop a fraud control policy for the NSW public sector that:
- Explicitly states the government’s commitment to fraud control
- Clearly articulates the government’s expectations of agencies to develop and implement fraud control measures.
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