Part 1: Introduction

Fraud awareness, prevention, and detection in the public sector.

This report:

  • sets out why the Auditor-General commissioned a fraud survey of the public sector in 2011 and provides information about other recent Australasian surveys on fraud;
  • provides high-level survey findings and international comparisons; and
  • describes our knowledge of the incidence of fraud in the New Zealand public sector.

In this Part, we discuss:

In Part 2, we discuss the main survey findings and international comparisons. In Part 3, we present detailed results of our survey. In Part 4, we discuss frauds that have been reported to us by our Appointed Auditors.

The purpose of our survey

New Zealand generally has a "clean" image when it comes to fraud. We consistently rank highly in international and domestic surveys that measure public trust in government and the effectiveness of systems and processes that deal with fraud and corruption. We attribute the general absence of systemic large-scale corruption in the private and public sectors to the integrity of our standards and controls, underpinned by strong and shared common values within a small and cohesive society.

However, we cannot be complacent if we are to maintain our good record of keeping fraud at bay. It is particularly important to be vigilant in the current global economic climate, because there is an increased risk of fraud when people struggle to make ends meet.

Fraud always attracts a great deal of interest – irrespective of its scale. Invariably, questions are asked about how the fraud took place and whether the controls designed to stop fraud were operating effectively.

Until recently, most surveys of fraud in New Zealand focused on the private sector, and there had never been a fraud survey of the whole public sector. In 2011, the Auditor-General commissioned PricewaterhouseCoopers (PwC) to carry out a survey on fraud awareness, prevention, detection, and response to gain better insight into fraud in the public sector.1 This included finding out about:

  • fraud risk factors;
  • prevention, detection, and response mechanisms and awareness of these; and
  • specific incidents of fraud.

The aim of this report is to provide you with the results of that survey. The results confirm a strong commitment within the public sector to protecting public resources.

Minimising the opportunity and removing the temptation to commit fraud are the best ways that public entities can protect the public's resources. Building a culture where governance, management, and staff are receptive to talking about fraud is important. Our findings suggest that the incidence of fraud is lowest where a public entity's culture is receptive to these discussions, communication is regular, and where incidents are reported to the relevant authorities.

Other recent Australasian surveys on fraud

Our survey into fraud in the New Zealand public sector is not the only recent survey about fraud in Australia or New Zealand. In the last three years, at least nine surveys on fraud in Australasia have been published. Figure 1 gives an overview of the most recent reports that included public sector participants.

Results from these surveys are not directly comparable because of differences in the scope and time period respondents were asked about, the sampling approach, the response rate, and the analysis, including the extent to which responses from the public sector and from New Zealand were included. However, the results of these surveys confirm many of the main findings of our survey.

Figure 1
Reports of fraud-related surveys in Australasia that included public sector results, 2008-2012

Author, date, and titleLocationDefinition/scopeResponse rateNumber of respondentsType of respondentIncidence*
Office of the Auditor-General (2011), Cleanest public sector in the world: Keeping fraud at bay New Zealand Fraud/corruption 74% 1472 Public sector 23%
J Lindley, P Jorna, and R G Smith (2012), Fraud against the Commonwealth 2009-10 annual report to government Australia Fraud 80% 152 Public sector 31%
J Lindley, P Jorna, and R G Smith (2011), Fraud against the Commonwealth 2008-09 annual report to government Australia Fraud 84% 149 Public sector 39%
Australian National Audit Office (2011), Fraud control in Australian Government agencies Australia Fraud 92% 160 Public sector 31%
PricewaterhouseCoopers (2011), The 2011 Global Economic Crime Survey Results for New Zealand 78 countries Economic crime Unclear 3877
(93 from New Zealand)
Total 50%
Public sector 60%
PricewaterhouseCoopers (2011), Fighting fraud in the public sector 35 countries Economic crime Unclear 177
(14 from Australia)
Public sector 37%
PricewaterhouseCoopers (2009), Fighting fraud in the public sector 35 countries Economic crime Unclear 170 Public sector 37%
KPMG (2010), Fraud and misconduct survey Australia and New Zealand Fraud 10% 214 Total 53%
Public sector (15) 61%
KPMG (2008), Fraud and misconduct survey Australia and New Zealand Fraud 21% 420 General 45%

* The percentage of respondents who replied that they knew of at least one incident of fraud, corruption, or economic crime having been committed in their entity in the survey period.

1: See the Appendix for a description of the survey methodology.

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