Part 1: Overview

Summary of our fraud survey results for local authorities.

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 keep 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.

The Auditor-General commissioned a survey on fraud awareness, prevention, and detection to gain better insight into fraud in the public sector. 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 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 confirm 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.

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.

Fraud awareness, prevention, and detection are the responsibility of each entity's governing body and its management. Through our audit work, we seek to promote discussion and awareness of fraud risks within entities, and between entities and their auditors. We hope that better sharing of information about fraud experiences will lead to better understanding of risks and the steps that we can all take to actively protect the public purse.

What are local authorities doing well?

Local authorities have good anti-fraud frameworks – most respondents said that their local authority had a fraud policy, a clear policy on gifts, and almost all had a code of conduct for staff. Respondents were also well aware of their local authorities' protected disclosures policy. Staff were confident that managers understood their responsibilities for preventing and detecting fraud. Most respondents said that their local authority encourages staff to come forward if they saw or suspected fraud or corruption.

What to focus on

Chief executives

As chief executive, you should:

  • maintain an environment where staff are willing to talk about fraud risks, and senior managers are receptive to those discussions; and
  • set the "tone at the top" by telling your management team that you want to see a fraud awareness training regime in place and regular reviews of the fraud control reviews.

Senior managers

As a senior manager, you should:

  • support the chief executive in maintaining an environment where staff are willing to talk about fraud risks;
  • regularly communicate with staff about your fraud policies and code of conduct;
  • regularly review your fraud controls;
  • provide fraud awareness (and refresher) training for your staff;
  • ensure that staff carry out pre-employment screen checks of potential employees and due diligence checks of any suppliers that they deal with – and tell all staff that these checks are carried out; and
  • tell your appointed auditor about all suspected or detected fraud, as soon as you suspect or detect it.

All other staff

You should:

  • recognise that you have a role in preventing, identifying, and responding to fraud;
  • be vigilant, because the risk of fraud is higher in tough economic times;
  • be willing to raise any concerns you might have; and
  • carry out due diligence checks on any suppliers that you deal with.

Key facts

Survey date: From 14 February to 3 June 2011
Total respondents: 1472
Total response rate: 74%
Number of respondents in local authorities: 172
Number of local authorities represented in the results: 47 of 78
Survey terms:
  • fraud means an intentional and dishonest act involving deception or misrepresentation by a person, to obtain or potentially obtain an advantage for themselves or any other person;
  • theft means to dishonestly, and without claim or right, take or deal with any property with intent to deprive any owner permanently of the property or interest in it; and
  • corruption is the abuse of entrusted power for private gain (such as soliciting or receiving gifts or other gratuities to perform an official duty or omit to perform an official duty).
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