Public sector fraud is in the news again this week in Queensland – a high ranking official was charged with fraud by the CCC and a former public servant was sentenced to jail (wholly suspended) for misappropriating $42k.
Fraud is pervasive and there is arguably no cost-effective, absolute way to ‘fraud-proof’ your organisation: I don’t believe anybody who says otherwise. But the reason that it is arguably more damaging than other types of wrongdoing is that it always attracts the headlines. If not managed well, the impact can touch all parts of your organisation, including personal and reputational standing in the community.
It is not coincidental that various integrity agencies (locally and abroad) have increased their focus on fraud risk in recent times. Queensland’s Auditor-General has completed several fraud related performance audits in the past few years and will report again to Parliament later this year on his current examination of fraud risk in local public sector agencies. There are similar initiatives elsewhere in Australia, for example the work of Victoria’s Auditor-General.
Drawing on my experience in conducting fraud risk reviews and investigations, a few key organisational characteristics stand out, and you may want to consider these when determining overall fraud risk profiles:
Materiality, volume and nature of financial transactions.
Cultural attitude towards internal controls, transparency and accountability.
Intrinsic value/commerciality of assets (especially important in today’s IP complex world of data and digital expansion)
Nature of relationships and co-dependencies on suppliers and delivery partners.
Short timeframes for implementation of major programs, especially those that provide an economic stimulus or are aimed at generating economic activity in a sector/region.
It pays to do an initial broad analysis to determine higher risk business areas/operations, before you focus your limited resources on a deeper dive fraud risk assessment.