The report outlines fraud committed against the Commonwealth and includes information to assist agencies to improve fraud control measures. It indicates that -
• there was a 12% reduction in reported incidents of fraud and a 17 % reduction in the amount lost across the Commonwealth;The AIC comments that -
• agencies recovered almost $200 million in funds lost to external fraud incidents, and almost $600,000 from internal fraud incidents;
• the AFP accepted 94 fraud referrals, 24 of which resulted in legal action;
• the CDPP secured almost $60 million from fraud cases by way of reparation under the Crimes Act and orders under the Proceeds of Crime Act – an increase of over $14 million from the previous year; and
• $498 million was lost to the Commonwealth in fraud, misuse or theft.
Fraud against the Commonwealth may be committed by individuals outside agencies (external fraud) who seek to claim benefits or obtain some other financial advantage dishonestly, or by those employed by agencies (internal fraud), including staff and contractors. The incidence and financial impact of internal fraud is generally lower than of external fraud, although both deplete government resources and have a negative impact on the administration of agencies.It goes on to comment that -
Fraud in the public sector deprives governments of income for providing services to their communities while fraud in the private sector can seriously harm, businesses and individuals alike. The 152 Australian Government agencies that responded to the present survey reported experiencing almost 706,000 incidents of fraud (internal and external), worth almost $498m during 2009–10. This was almost 17 percent less than the amount lost in 2008–09, and almost 12 percent fewer reported incidents than in 2008–09. Reported losses arising from internal fraud, however, increased by almost 10 percent between 2008–09 and 2009–10, with more than $2m lost in 2009–10.
These totals under-represent the true value of fraud losses, as only 43 percent of agencies that experienced fraud specified a loss in 2009–10 (26 out of the 61 agencies that experienced fraud). This was an improvement on the situation in 2008–09, when only 40 percent of agencies that experienced fraud specified a loss (23 out of 58 agencies that experienced fraud). The ability to quantify a loss depends on various factors, including the availability of evidence of what transpired, whether the investigation had been finalised and the nature of the dishonesty practised. Some instances where intangible losses are involved are difficult to quantify.
Responses vary when fraud is identified within agencies. Some responses are obligatory under official policies and laws, and others are optional depending on the scale and circumstances of the offence. Often, however, fraud is not reported officially and sometimes repeat victimisation occurs—occasionally by the same offender against the same agency. Both government and business have developed an extensive range of responses to this problem over the past decade, notably in response to changes in information and communications technology and the resulting increased vulnerability to computer-enabled crime.
Almost the same percentage of agencies reported fraud victimisation in 2009–10 as in 2008–09 (40% in 2009–10, 39% in 2008–09). Slightly more agencies reported external fraud (34%) than internal fraud (31%), while nearly one-quarter had experienced both types of fraud (24%). Seven percent of agencies reported incidents of collusion between individuals within agencies and those outside agencies in 2009–10, the same as in the preceding year. In total, 705,547 incidents of fraud (internal and external) were reported in 2009–10 by 61 agencies —a reduction of almost 12 percent of the number of incidents from the 800,698 reported in 2008–09.
There were considerably more reported incidents of fraud alleged against persons external to agencies (external fraud) than against employees and contractors (internal fraud). In 2009–10, 47 agencies reported 3,001 incidents of internal fraud. For the five specified categories of internal fraud, incidents relating to ‘financial benefits’ affected the largest proportion of agencies (20%, n=30). For the specific subcategories of internal fraud, ‘leave and related entitlements’ affected the highest number of agencies experiencing internal fraud (n=19, 40%), which differed from 2008–09, when misuse of government credit cards affected the largest number of agencies (38%).
Agencies reported 702,941 incidents of external fraud, some of which may have involved allegations of non-compliance with regulatory instruments rather than actual incidents of financial crime. Most incidents related to ‘entitlements’; however, this only affected a small number of the largest agencies. One agency reported 75,644 incidents related to entitlements, while another reported 613,996 incidents which were comparable in scale to those reported by these agencies in 2008–09. For external fraud, the type of incident affecting the greatest number of agencies involved ‘financial benefits’ (21%).The specific category of fraud that affected the greatest number of agencies was ‘theft of telecommunications or computer equipment (including mobile devices)’ (n=18, 35%). It was found that smaller agencies, with 500 or fewer employees, were less likely to report fraud incidents than those with more than 500 employees. However, while the smaller agencies reported fraud at lower rates, they were not completely immune. Eighteen percent of smaller agencies reported experiencing at least one fraud incident, while 83 small agencies reportedly did not experience any fraud.
The total loss reported by agencies was $497,573,820, although only 42 percent of agencies that experienced fraud specified a loss.
Fifty-three percent of agencies that reported experiencing an internal fraud incident reported a financial loss in 2009–10 totalling $2,039,162, compared with 60 percent in 2008–09 totalling $1,856,707—an increase of almost 10 percent.
Fraud related to ‘misuse of entitlements’ was the most costly internal fraud category, with agencies reporting more than $1.2m lost to this fraud type alone.
Fifty-one agencies experienced an incident of external fraud, worth $495,534,658 in 2009–10, although only 65 percent of agencies that experienced an incident of external fraud specified a loss. This was a 17 percent decrease in reported losses from external fraud from 2008–09. The largest external fraud losses arose from fraud relating to ‘entitlements’, with a total estimated loss of $487m in 2009–10 compared with $489m in 2008–09. For both internal and external fraud, there were several agencies that suffered losses they were unable to quantify.
In 2009–10, some 40 percent of total reported losses were recovered by agencies, with $196,735,497 recovered. This was a considerable increase in the proportion of losses recovered in 2008–09, when $139,312,337 was recovered. The vast majority of funds recovered related to external fraud. ...
In 2009–10, 5,010 defendants were referred to the CDPP for prosecution involving allegations of fraud. Of these, 4,913 were prosecuted, resulting in 4,180 convictions and 29 acquittals. It should be noted that prosecutions undertaken by the CDPP in 2009–10 may relate to cases that had been referred to the CDPP in previous years. Accordingly, some cases that agencies referred to the CDPP in 2009–10 may have been prosecuted in later years. Charges against those prosecuted for fraud in 2009–10 involved alleged financial losses of almost $100m. The CDPP secured more than $59m by way of reparation under the Crimes Act 1914 (Cth) and pecuniary orders under the Proceeds of Crime Act 1987 (Cth). These recoveries related only to monies recovered during 2009–10.
