20 June 2012

The Auditor General published more details yesterday of the findings of a fraud survey she commissioned from PricewaterhouseCoopers in 2011.  The publication has the effect of reinforcing awareness of the survey findings and serves to remind all agencies of their responsibility “…to minimise risks and limit losses, while working to strengthen and protect our sense of community and values…”

The report outlines the survey findings and international comparisons, confirming the general absence of systemic large scale corruption witin New Zealand agencies, which may well be attributable  to “….the integrity of our standards and controls, underpinned by strong and shared common values…”

The Auditor General notes that risks will  increase as people struggle to make ends meet;  vigilance is necessary – “we cannot be complacent…”

Survey respondents were aware of more fraud in local government (32.4%) than central government (28.4%), and much less in schools (7.7%).  Theft of cash and equipment was more common than fraudulent expense claims, payroll fraud or false invoicing.

The most common reason offenders gave for committing fraud was a belief that they didn’t think they would get caught.

Although comprising only 26% of fraud incidents, managers were responsible for 85% of fraud by value.  International data shows that fraud is increasingly committed by people at a managerial level or above.

The Auditor General confirms that there is a strong correlation between the culture of an agency and the incidence of fraud.  She sets out six behavioural characteristics – not unlike the State Services Commission “six trust elements” – thatwill help keep fraud at bay:

  • setting the tone at the top
  • putting in place appropriate controls, policies and procedures
  • talking openly about fraud and the risk of fraud
  • making sure staff feel safe to report fraud
  • ensuring staff know about fraud policies and procedures
  • telling staff about fraud incidents and how they were dealt with

Agencies can be protected by their values and systems only if there is continual reinforcement of the importance of integrity and trustworthiness, and a culture of “doing the right thing”.