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Improving Fraud Controls

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The Australian Institute of Criminology (AIC) estimated fraud losses within Australian government entities during 2018–19 of $149,680,728 ($2,775,917 from internal fraud; $146,904,811 from external fraud).

Agencies can be exposed to fraud in many ways. However, the Commonwealth Fraud Control Centre found that individuals or groups committing fraud typically use one of eight fraudster personas. These are: 

  1. The Reckless – acts without care, responsibility or regard for the consequences of their actions by disregarding requirements, procedures, warnings or directions to gain personal benefits. 

  2. The Deceiver –  makes others believe something that is not true to gain personal benefits dishonestly. 

  3. The Impersonator –  pretends they are another person or entity to gain personal benefits dishonestly. This might involve using false or stolen identities, attributes or credentials for personal gain. 

  4. The Fabricator –  invents or produces something false to dishonestly gain personal benefits. This might involve creating false invoices or other records for personal gain. 

  5. The Coercer –  influences, manipulates or bribes another person to act in a desired way to gain personal benefits dishonestly. This might involve negative incentives such as threats or intimidation or positive incentives such as favour or monetary kickbacks. 

  6. The Exploiter –  uses something for an unlawful purpose to dishonestly gain personal benefits. This might involve misusing their position or privileges or dishonestly exploiting a vulnerability for personal gain. 

  7. The Concealer –  hides their actions from being seen or known about to gain personal benefits dishonestly. 

  8. The Organised –  are groups that use a combination of methods in planned, coordinated and sophisticated ways to gain benefits dishonestly. 

 

Organised crime groups in Australia can range from local crime groups to overseas-based groups. They are diverse, flexible, capable, resourceful and resilient. They evolve and adapt to environmental changes to look for vulnerabilities to exploit for criminal gain. They are also increasingly using professional facilitators and service providers to help or facilitate their illegal activities. 

The Australian Government controls fraud in government agencies through a Fraud Rule3, the Commonwealth Fraud Control Policy and Fraud Guidance4. Knowing that these controls are operating effectively assures agencies that they are appropriately mitigating fraud risks. 

Pitt Group has worked with several government agencies to provide this assurance, and in 2021 a small agency engaged Pitt Group to assure its fraud control processes. Pitt Group was asked to determine the adequacy of the agency’s management of fraud risks, whether there were any gaps in its fraud control plan and to identify any opportunities for improving fraud controls.  

Pitt Group spent some time understanding the agency’s operating environment, and its approach to managing fraud risk.   

Pitt Group used a structured approach to assessing the adequacy of the agency’s arrangements that recognises that effective fraud control requires several interrelated strategies, including: 

  • adequate policies, processes and systems to prevent, detect, respond to, record and report fraud 

  • risk management and planning 

  • appropriate governance arrangements 

  • an appropriate organisational culture 

  • effective leadership. 

 

Pitt Group used a variety of methods to undertake the review, including: 

  • assessing the compliance of the existing Fraud Control Plan with the Commonwealth Fraud Control Framework 

  • reviewing the quality and completeness of the fraud risk register 

  • assessing whether the existing controls are appropriate to mitigate the identified sources of fraud risk. 

  • identifying any changes to the organisation’s operations and environment that could materially affect the nature and significance of fraud risks 

  • reviewing a sample of fraud controls. 

 

Pitt Group was able to assure the agency that its Fraud Control Framework and Plan were comprehensive and aligned to the Commonwealth’s Fraud Control Framework. Pitt Group was also able to assure the agency that the Fraud Control Plan and fraud risk register supported the department in identifying and mitigating its fraud risks. However, Pitt Group worked collaboratively with the agency to identify several practical ideas to improve the Framework and Plan further. 

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