Part 3 : Incidents of fraud in licensing and community trusts

Despite our generally "clean" image, fraud is a fact of business life in New Zealand: six of the nine respondents were aware of at least one incident of fraud or corruption in their licensing or community trust within the last two years.

Those who knew of an incident in the last two years were asked for details of the most recent incident.

The value of the most recent fraud noted by respondents in licensing and community trusts was mostly low. Five respondents said that the most recent fraud was for an amount less than $10,000. The sixth respondent said that the amount of the most recent fraud was less than $50,000.

The six respondents who were aware of fraud incidents in licensing and community trusts all said that the fraud was committed by one internal person acting alone, typically at line manager or operational staff level.

Respondents said that five of the six most recent frauds in licensing and community trusts involved the theft of cash. Three respondents said that the fraud occurred primarily because the perpetrator did not think they would get caught. The other three respondents said it was because internal control policies and procedures were not followed, because there was easy access to cash, and because someone in management over-rode the internal controls.

Internal control systems were licensing and community trusts' most successful mechanism for detecting fraud, with three respondents saying the frauds were detected in this way. Two respondents said that internal audits discovered the frauds, and one said that the fraud was detected after a change of duties.

None of the respondents said that the fraud incidents were detected by the external auditor. This is not surprising, because detecting fraud is neither the purpose nor the focus of an external audit.

Questions 32 to 40 in Appendix 1 set out the survey response data about incidents of fraud.