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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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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