Section 3: Fraud response

Question

23. Should a fraud or corruption incident occur at my organisation, the investigation is conducted by (you may choose more than one answer):
    • Internal Investigator
    • External Investigator
    • Line Manager
    • HR Representative
    • Don’t know
    • Other
24. Management communicates incidents of fraud to all staff at my organisation.
25. I am aware of fraud or corruption incidents in the last two years that have gone unreported by my organisation.
26. I am aware of fraud or corruption incidents in the last two years that have gone unpunished by my organisation.
27. Inappropriate or personal credit card expenditure is taken very seriously and results in disciplinary action.
28. Inappropriate expenses claims or expense claims for personal purchases, is taken very seriously and results in disciplinary action.
29. I am confident that my organisation will take all reasonable action to recover any money lost through fraud or corruption.
30. I am confident that incidents of fraud and corruption that occur at my organisation will be reported to Police.
31. Internal controls are reviewed as part of every fraud investigation.

We would expect public sector organisations to have a “zero tolerance” approach to fraud. Those organisations that do not apply appropriate sanctions may be sending an incorrect message to their staff.

Respondents indicated that their organisation tended to address matters of fraud internally. Only if there is sufficient materiality or evidence available do they refer the matter to the appropriate agency, usually the Police. It is our experience that many organisations are reluctant to bring criminal charges against employees, not only because of materiality, but also because of the time and costs of developing a case; the time it takes for matters to be resolved in the Courts and a perception that fraud is a low priority for Police.

To help alleviate these issues, we would advise organisations to have (or have access to) suitably skilled people with a working knowledge of investigation (including interview techniques) and relevant legislation. This will help ensure that the Police receive information that has been correctly gathered to the required evidential standards.

The Auditor-General expects public sector organisations to consider reporting matters of fraud to an appropriate authority. In the main, this will be the Police and/or the Serious Fraud Office. 78% of respondents say that they are confident that their organisation will report incidents of fraud to the Police.  

The survey also showed that organisations that  report incidents of fraud to the Police experienced less incidents of fraud than those organisations that did not report to the Police.

Any decision poorly made not to report fraud can erode staff confidence in management. It may bring about a perception that management are not sufficiently committed to addressing such matters and may discourage staff from reporting concerns.

It also brings the risk that an employee suspected of committing fraud may go on to another organisation and continue their fraudulent behaviour. We are aware of numerous instances of that occurring.

Management should consider communicating instances of fraud to staff when they occur (subject to any legal constraints) to help promote the message that fraud and associated misconduct is taken seriously and appropriate action has and will be taken.