investigating and preventing public sector fraud 4 april 2012
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Investigating and Preventing Public Sector Fraud 4 April 2012. Lewis Rangott. Case study: Close relationships with vendors. Senior manager with a significant budget and complex projects requiring the appointment of multiple vendors

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Presentation Transcript
case study close relationships with vendors
Case study: Close relationships with vendors
  • Senior manager with a significant budget and complex projects requiring the appointment of multiple vendors
  • The senior manager had significant technical expertise and a private sector background
  • Email / CCR analysis showed extensive receipt of gifts, hospitality and friendships with vendors
  • Exposed agency to watchdog scrutiny and jeopardised project delivery
  • Lessons:
  • “Key person risk” is rarely managed properly
  • Arm’s length procurement staff or probity advisors should be used on complex tenders
case study secondary employment risk
Case study: Secondary employment risk
  • Mid-ranking officer in a government department
  • Had an outside business that overlapped with his public duties
  • Poor departmental controls around valuable equipment and resources
  • Lead to misappropriation of tens of thousands of dollars worth of equipment
  • Lessons:
  • Approximately 620,000 Australians are multiple job holders (source: ABS Cat. 6105)
  • Secondary employment risks trigger all points of the Fraud Triangle
  • Control of equipment and resources is often poor in the public sector
the fraud triangle
The Fraud Triangle

Opportunity

Pressure

Rationalisation

case study r sum fraud
Case study: Résumé fraud
  • Contract manager with procurement duties
  • History of detectable fraudulent behaviour
  • Changed his name and falsified his résumé
  • Detected by chance
  • Lessons:
  • 20%-30% of résumés contain serious falsehoods (source: ICAC, ‘Operation Avoca’ report, August 2010)
  • Agencies with poor employment screening are targeted
  • Similarly, inadequate vendor screening is a risk
effects of implementing fraud mitigation strategies
Effects of implementing fraud mitigation strategies
  • This is a comparison of the median losses at organisations that had implemented each specified fraud control with the median losses for those organisations that did not have that control.

Source: Association of Certified Fraud Examiners – 2010 Report to the Nations on Occupational Fraud & Abuse – p.43

ernst young s anti fraud framework

Proactive

Reactive

Setting the Proper Tone

Anti Fraud Program Policies

Communications andTraining

FraudRisk Assessment

Fraud Controls Monitoring

Fraud Response Plan

Code of Ethics

Ernst & Young’s Anti-Fraud Framework

Practical steps that can enhance an organisation’s ability to mitigate fraud risk and strengthen its corporate governance framework

Exampleactions

  • Tone communication program
  • Code compliance confirmations
  • Whistleblower channels
  • Fraud awareness training
  • Induction and training processes
  • ASX 7 sign off
  • Escalation and investigation protocols
  • Discipline and compliance enforcement
  • Control remediation for known issues
  • Financial recovery
  • Fraud Policy and Procedures
  • Disciplinary code
  • Delegation of authority
  • Ethical guidance
  • Fraud risk policy
  • Insurance programs
  • Employment contracts
  • Annual Business Ethics surveys
  • Fraud vulnerability assessments and scenario analysis
  • Deep dive reviews by internal audit
  • Incident reporting
  • Annual and half yearly self assessment
  • Process Data Analytics
contact details
Brenton Steenkamp, Partner, Fraud Investigation and Dispute Services, Ernst & Young

Email: [email protected]

Lewis Rangott, Manager, Fraud Investigation and Dispute Services, Ernst & Young

Email: [email protected]

Contact details

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