tasmanian fraud and corruption survey

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Tasmanian fraud and corruption risk real, action imperative

3 September 2015: More than a quarter of Tasmanian businesses, public sector organisations and not-for-profits have been the victim of fraud in the last two years. But a new Deloitte report reveals that, with fraud and corruption risk greater than ever, the state is less than prepared when it comes to managing the risk and preventing incidents.

Key findings of the first biennial Deloitte Tasmanian Fraud and Corruption Survey, which involved 160 individuals from organisations across the state, include:

  • 27% of respondents said their organisation had been a victim of fraud in the last two years
  • 21% of senior management respondents, and 36% of board and audit committee members, said their organisation’s vulnerability to fraud risk had increased in the last 12 months
  • 35% of respondents indicated they were aware of an incident of fraud in the last two years that went unpunished by the organisation,
  • 21% of instances of fraud were not reported to the police
  • 64% of organisations do not provide fraud and corruption awareness training to any employees, and only 25% had received any training within the last 12 months
  • Only 60% of organisations have a documented fraud policy, and where they have one, only 37% regularly communicated it to their people
  • Only 48% of organisations have a whistleblower policy, and 44% have a fraud and corruption control officer or similar assigned role.

Deloitte Office Managing Partner Tasmania, Carl Harris, said that the types of fraud encountered ranged from cash theft and misappropriation of assets, to cyber-attacks and theft of customer data.

“Fraud costs Australia an estimated $8.5 billion a year and, according to Tasmania Police, reported local incidents increased by over 18% between 2011/12 and 2013/14,” he said.

“So Tasmania is not immune to fraud, and our survey results actually suggest that incidents are underreported.”

More than a quarter of survey respondents experienced an incident of fraud within the past two years and, although the financial losses involved were mostly low – 57% resulted in a loss of less than $5,000 – the largest involved more than $200,000.

“In today's business environment, where an incident has the potential to cause reputational damage, revenue pain, loss of market opportunities, severe penalties and greater regulatory scrutiny, the costs can often far exceed the dollar value of the fraudulent act,” Harris said.

“But just as fraud and corruption risk and incidence is real and complex, the reality is that many Tasmanian organisations remain ill-equipped to identify, manage and, most importantly, prevent them.”

Most respondents reported that their organisation is serious about promoting ethical behaviour and encouraging employees to come forward if they observe or suspect fraudulent acts. However, fraud training and awareness efforts appear to be under-resourced in most organisations.

And while the vast majority of respondents believe their organisation takes proactive steps to reduce fraud and corruption risks as they arise, less than half of organisations conduct ongoing reviews of the effectiveness of their fraud detection and prevention activities.

Deloitte Risk Advisory partner, Elizabeth Lovett, said: “Every business, every organisation, has an obligation to look at its operations through both professional and ethical lenses.

“It is critical that they explore their fraud and corruption risks, understand where they are susceptible to weakness and take a proactive approach to managing vulnerabilities.

“The fact that just over half of our respondents’ organisations perform regular fraud risk assessments is a positive, but this also means that nearly half of them don’t, which is a serious concern.”

Every organisation needs an effective and efficient fraud risk management framework, supported by the right technology and analytics, that can identify fraud in a timely manner, encourage and deliver an appropriate response and, ultimately, minimise the resulting damage.

Harris said: “Senior leaders need to establish a strong ‘tone from the top’ when it comes to a robust anti-fraud culture.”

Lovett concluded: “Internal controls, fraud policies, codes of conduct, fraud detection and reporting mechanisms, and fraud risk assessments, all reviewed on a regular basis, are needed to ensure they are working as prescribed. And appropriate reporting mechanisms need to be in place to ensure employees are protected and feel comfortable coming forward.”

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