Part 1: Overview

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.

This report sets out the fraud summary results for respondents working in:

• airports;
• port companies;
• electricity lines businesses;
• a collection of other local government entities that do not fall in any of the above categories (local government – other); and
• council-controlled organisations.

What are these entities doing well?

Respondents from these entities told us that their entities have some of the essentials in place. The entities:

• have codes of conduct;
• encourage staff to raise concerns; and
• have senior managers who understand their roles and responsibilities.

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;
• ensure that senior managers put all the essentials in place (such as reminding staff about policies, reviewing fraud controls, and providing regular fraud awareness training); and
• make your "zero tolerance" position on fraud well known.

Senior managers

As a senior manager, you should:

• support the chief executive in maintaining an environment where staff understand and are willing to talk about fraud risks;
• make sure you have a protected disclosures policy, and that staff know about it;
• regularly circulate your fraud policy, and check that staff have read and understood it;
• carry out pre-employment screening checks of new staff, and due diligence checks of suppliers; 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