Public sector fraud on increase says new survey

(CNS): An international survey by PricewaterhouseCoopers has revealed that fraud continues to be a persistent threat in the public sector the world over with asset misappropriation, accounting fraudand bribery and corruption the top three frauds. The report said that a large number of frauds are committed by employees that organisations trust and have access to significant amounts of data. It also found a rise in procurement frauds in the last twelve months. The survey shows that despite being the most likely perpetrators of fraud, public sector workers are less likely to be dismissed over fraudulent acts than other sectors. 

PwC said it was easy for individuals to simply transfer departments, leaving them free to commit their crimes over and over again.

“If public sector organisations are to adopt a zero tolerance approach to economic crime, they need to consider seriously the actions taken against fraudulent behaviour," the consultants warned in the report entitled, Fighting fraud in government.

During the survey the respondents from 36 different jurisdictions were asked ‘core’ questions on economic crime. Of the government and public sector respondents, 46% reported experiencing one or more incidents of economic crime in the last year, up by more than 10% on the results of the last survey conducted on the subject by PwC in 2009 and well above the average of 34% across the private sector.

“As the public service market becomes more open and suppliers more diverse with more voluntary and private sector organisations become involved in delivering public services, procurement departments will also face a whole raft of new challenges to ensure that the quality and cost-efficiency of the services being delivered are not compromised,” the report’s authors stated.

PwC warned that supplier frauds still occur because prevention is often reliant on the vigilance of employees and traditional detective measures could easily miss fraud that is hidden within millions of transactions and thousands of suppliers.

“Most procurement frauds are conducted over a period of several years and it can be hard for organisations to recoup any losses. It is, however, an area where new technologies, and, in particular, advanced data analytics, can bring real benefits in detecting fraud and identifying clusters of unusual transactions,” the report stated.

The survey also revealed a marked increase in cyber-crime. In previous global economic crime surveys, PwC said respondents reported very low levels of this type of crime and results were combined ‘other types of fraud’ in the surveys. With the increasing concerns around cyber threats, however, in this year’s report cyber-crime was rated as a separate category of fraud with 14% of respondents in the public sector reporting having experienced a cybercrime attack in the past 12 months.

The consultants warned that governments cannot ignore the growing risk, not least because of the personal and confidential data held that made them prime targets for attack.