Information sourced from Why Fraud Management is Important (September 2015) by LGAQ Total Solutions consultant Terry Campbell
The QAO Fraud Management in Local Government - Report 19: 2014-15 surveyed all Qld councils to determine performance against accepted standards for fraud and corruption control. The survey also collected instances of alleged or confirmed fraud cases in councils.
In conclusion, the report found that most councils are not effectively managing their fraud risks and that there needs to be greater awareness and understanding of fraud and corruption, how widespread it is and what it costs local government. Download the Better Practice Checklist.
Importantly, it is the civic duty of local government to recognise that fraudulent activities against councils impact directly on the community by
- reducing funds available for delivering public goods & services and
- undermining public confidence in the council
Understanding that effective fraud control measures in one council may be unnecessary or insufficient in another earmarks a risk based approach to fraud management as largely suitable for Qld local government. This approach enables a council to target resources, both in prevention and detection, at its unique problem areas.
An effective fraud risk identification process includes an assessment of the incentives, pressures, and opportunities to commit fraud (LGAQ Total Solutions can offer Fraud Risk Reviews by highly experienced Internal Audit Consultants). Fraud prevention strategies then become the first line of defence and provide the most cost-effective method of controlling fraud within the organisation. See Key Features of a Good Fraud Control Plan
There can be no doubt that well managed preventive controls serve as fraud deterrents - fear of getting caught is always a strong deterrent.
Additionally, an effective management plan will include systems for the early-warning, detection and monitoring of fraud. The LGAQ is currently exploring how data analytics techniques can play a significant role for councils. Analysing data from accounting cycles can often make the ‘red flag’ indicators of fraud apparent - see page 75 of the Report for more detail on red flag indicators and the Red Flag Indicators document on the LGAQ Total Solutions website for listings of acknowledged red flags.
Finally, to deliver, implement and communicate your Fraud Management Plan it is vital to provide your staff with initial AND ongoing training in this area. LGAQ Total Solutions can provide Fraud Prevention and Management workshops and online Fraud Awareness programs.
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All of the included document links in this article can be found on the LGAQ Total Solutions Fraud Prevention webpage.