Commonwealth staff should be trained to detect fraud, criminologists say

By Shannon Jenkins

July 9, 2019

Photo by Freddie Collins on Unsplash

Lack of resources and lack of staff hinder the ability of Commonwealth entities to prevent fraud, according to a new report from the Australian Institute of Criminology (AIC).

Every year, non-corporate Commonwealth entities provide the AIC with their experiences of fraud as well as the preventative methods they have implemented.

The latest set of survey data from 131 entities revealed that 77% of entities did not have staff solely dedicated to fraud-related duties.

This is despite fraud being an ongoing concern for Commonwealth entities, according to the authors of the report, Penny Jorna and Russell Smith.

“Entities are attractive targets for people willing to commit fraud targeting the programs funded by the government, the payments made by service providers, the information held or the resources administered by different entities,” they said. 

“The main take-home message from the 2016–17 census is that having adequate resources to actively look for fraud, to encourage fraud prevention and to have trained investigators will allow entities to have a greater understanding of where their fraud risks lie and how they may counter those risks.”

Fraud threats could come from employees, contractors, customers of the entities, or those who have no connection to the entity at all. While the Commonwealth faces a greater number of external fraud threats than from its employees, this should not lead to complacency concerning internal fraud, the report noted.

The AIC found that internal risks to entities arise mainly from the information they hold, with 19% of internal investigations citing information as the primary target. In cases of external fraud, the major risks are financial, and “must be combated through adequate resourcing and trained employees to detect and investigate fraud”. 

More than half of respondents said their accountable authority had reported to their minister or presiding officer regarding their fraud control measures for 2016–17, and non-corporate entities were more likely to have reported this than corporate entities. 

Entities fulfilled their duty to conduct fraud risk assessments in 2016–17, the AIC found, with only 10% of entities failing to complete a risk assessment within the previous two years.

Internal fraud

Financial fraud was most common in the priciest internal frauds, followed by that involving employee entitlements or benefits.

Suspects in the most costly internal frauds were predominantly aged 35–44 years, with an even number of male and female suspects and no senior public servants.

Total losses incurred in the most costly internal frauds amounted to $196,555, a massive reduction from the $613,406 reported in 2015–16.

Asset misappropriation was the most common method of committing fraud in the most costly internal investigations as well as overall investigations. It was used in 999 cases of internal fraud, and was involved in 342,072 external fraud investigations. 

While information was the most common target out of 452 internal fraud investigations, internal financial fraud was investigated by the largest number of entities: 13.

The total known losses for more than 1000 internal fraud investigations came to $1,860,103.

Amounts recovered from internal fraud losses equated to $767,771, compared to $338,393 in 2015–16.

External fraud

Out of a whopping 342,342 external investigations conducted by 18 entities, financial fraud was the primary target. More than 95% of these investigations involved one large entity and payment card fraud. 

In 2016–17, more males than females committed the most costly external frauds reported and the most common age group of suspects was 55–64 years. The single most costly external fraud investigated reported a loss of $1,064,000. 

Known external losses equated to $91,920,748 in total, compared with $34,757,522 external losses in 2015–16. Jorna and Smith attribute this huge growth to an increase in finalised investigations. 

In regards to external investigations, 16 respondents gave details of recovered losses totalling $4,430,731 — more than three times the amount recovered in 2015–16 .

Corruption and collusion not identified

There were only 98 finalised fraud investigations involving corruption in 2016–17, compared with 153 in 2015-16. However, there were 2,942 cases in 2016-17 where respondents could not say if corruption was involved. 

Three entities finalised 28 fraud investigations that involved collusion between internal and external parties. This was considerably less than the 81 collusion-related investigations in 2015–16. However, there were 2,938 investigations in 2016–17 in which respondents failed to say whether collusion occurred.

The Australian Federal Police had 140 fraud-related matters still on hand at 30 June 2017, with an estimated dollar value of $2.4b — double the amount of the year before. 

There were 1,399 defendants prosecuted in fraud-type matters by the Commonwealth Director of Public Prosecutions in 2016–17. This resulted in 1,121 convictions. 



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