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Tackling fraud in the Federal public sector

Interest in an anti-corruption body at the Federal level appears to be gaining momentum. The Federal Opposition has recently announced plans to establish a National Integrity Commission overseen by a Joint Standing Committee of the Parliament.[1]

According to Transparency International’s Corruption Perception Index 2016, Australia has increased its levels of perceived corruption[2]. A recent study by the Australia Institute found that increased perceptions of corruption in Australia has potentially reduced GDP by $72.3 billion, or four percent[3].

Corruption may take many forms, but the most pernicious one having an impact on the public sector is likely to be fraud. In 2017, the conservative estimate of the cost of fraud to Australians was over $1 billion a year.[4]

It is timely in this context to review what mechanisms already exist to tackle fraud in the Federal public sector.

Fraud against the Commonwealth is a criminal offence under chapter 7 of the Criminal Code. Fraud against the Commonwealth may be described as ‘dishonestly obtaining a benefit, or causing a loss, by deception or other means’.[5]

Under the Public Governance, Performance and Accountability regime which operates at the Federal level, the accountable authority of a Commonwealth entity must take all reasonable measures to prevent, detect and deal with fraud relating to the entity.[6] This includes the obligations to:

  • conduct fraud risk assessments regularly and whenever necessary, such as following a major agency restructure
  • develop and implement a fraud control plan to deal with identified risks subsequent to conduct of a risk assessment
  • have an appropriate mechanism for:
    • preventing fraud: this can be fraud awareness training and taking the risk of fraud into account when planning and conducting activities, such as procurements
    • detecting fraud, including a confidential reporting mechanism
    • investigating or otherwise dealing with fraud
    • recording and reporting incidents of fraud or suspected fraud.

Relevant to detection and investigation is the Public Interest Disclosure Act 2013 (PID Act), which requires the principal officer conducting an investigation to act in accordance with the PGPA Rules, to the extent that the investigation relates to one or more instances of fraud (as long as the Rules are not inconsistent with the PID Act.)[7] The breadth of the definition of disclosable conduct which may be investigated under the PID Act involves both public officials and contracted service providers and would include conduct that involves, or is engaged in for the purpose of, fraud as well as corruption.[8]

The Commonwealth Fraud Control Policy (Policy) binds all non-corporate Commonwealth entities and is considered better practice for corporate Commonwealth entities.[9] The Policy was developed to support the accountable authorities of non-corporate Commonwealth entities to discharge effectively their responsibilities under the PGPA regime. It sets out key procedural requirements such as prevention and training, investigations and reporting.

The Resource Management Guide No. 201 – Preventing, detecting and dealing with fraud (RMG 201), issued by the Attorney-General’s Department, complements the Policy. It adds further detail in respect of such issues as fraud risk assessment, fraud control plans, fraud prevention, awareness and training, outsourcing, detection, investigation and response, and quality assurance and reviews. RMG 201 is regarded as better practice guidance and is not binding.

The PGPA regime, Policy and RMG 201 all make up the Commonwealth Fraud Control Framework.

Whilst the Government considers the merits of a Federal anti-corruption body, Australian Government agencies should review their compliance with the current Commonwealth Fraud Control Framework.

 

Author 
Russell Wilson | Special Counsel
T +61 2 6120 4839
E russell.wilson@maddocks.com.au

[1] The Australian Financial Review, 31 January 2018, page 8.

[2] See https://www.transparency.org/news/feature/corruption_perceptions_index_2016

[3] See http://www.tai.org.au/content/corruption%E2%80%99s-723-billion-hit-gdp

[4] Commonwealth Fraud Control Framework: https://www.ag.gov.au/CrimeAndCorruption/FraudControl/Documents/CommonwealthFraudControlFramework2017.PDF

[5] Based on fraudulent conduct offences under part 7.3 of the Criminal Code and other relevant offences under chapter 7 of the Criminal Code.

[6] Public Governance, Performance and Accountability Rule 2014, section 10.

[7] Section 53(4) Public Interest Disclosure Act 2013

[8] Item 3(b) of the definition of disclosable conduct in section 29(1) of the Public Interest Disclosure Act 2013.

[9] Section 21 of the Public Governance, Performance and Accountability Act 2013 requires the accountable authority of a non-corporate Commonwealth entity to govern the entity in a way that is not inconsistent with the policies of the Australian Government.

Interest in an anti-corruption body at the Federal level appears to be gaining momentum. The Federal Opposition has recently announced plans to establish a National Integrity Commission overseen by a Joint Standing Committee of the Parliament.[1]

According to Transparency International’s Corruption Perception Index 2016, Australia has increased its levels of perceived corruption[2]. A recent study by the Australia Institute found that increased perceptions of corruption in Australia has potentially reduced GDP by $72.3 billion, or four percent[3].

Corruption may take many forms, but the most pernicious one having an impact on the public sector is likely to be fraud. In 2017, the conservative estimate of the cost of fraud to Australians was over $1 billion a year.[4]

It is timely in this context to review what mechanisms already exist to tackle fraud in the Federal public sector.

Fraud against the Commonwealth is a criminal offence under chapter 7 of the Criminal Code. Fraud against the Commonwealth may be described as ‘dishonestly obtaining a benefit, or causing a loss, by deception or other means’.[5]

Under the Public Governance, Performance and Accountability regime which operates at the Federal level, the accountable authority of a Commonwealth entity must take all reasonable measures to prevent, detect and deal with fraud relating to the entity.[6] This includes the obligations to:

  • conduct fraud risk assessments regularly and whenever necessary, such as following a major agency restructure
  • develop and implement a fraud control plan to deal with identified risks subsequent to conduct of a risk assessment
  • have an appropriate mechanism for:
    • preventing fraud: this can be fraud awareness training and taking the risk of fraud into account when planning and conducting activities, such as procurements
    • detecting fraud, including a confidential reporting mechanism
    • investigating or otherwise dealing with fraud
    • recording and reporting incidents of fraud or suspected fraud.

Relevant to detection and investigation is the Public Interest Disclosure Act 2013 (PID Act), which requires the principal officer conducting an investigation to act in accordance with the PGPA Rules, to the extent that the investigation relates to one or more instances of fraud (as long as the Rules are not inconsistent with the PID Act.)[7] The breadth of the definition of disclosable conduct which may be investigated under the PID Act involves both public officials and contracted service providers and would include conduct that involves, or is engaged in for the purpose of, fraud as well as corruption.[8]

The Commonwealth Fraud Control Policy (Policy) binds all non-corporate Commonwealth entities and is considered better practice for corporate Commonwealth entities.[9] The Policy was developed to support the accountable authorities of non-corporate Commonwealth entities to discharge effectively their responsibilities under the PGPA regime. It sets out key procedural requirements such as prevention and training, investigations and reporting.

The Resource Management Guide No. 201 – Preventing, detecting and dealing with fraud (RMG 201), issued by the Attorney-General’s Department, complements the Policy. It adds further detail in respect of such issues as fraud risk assessment, fraud control plans, fraud prevention, awareness and training, outsourcing, detection, investigation and response, and quality assurance and reviews. RMG 201 is regarded as better practice guidance and is not binding.

The PGPA regime, Policy and RMG 201 all make up the Commonwealth Fraud Control Framework.

Whilst the Government considers the merits of a Federal anti-corruption body, Australian Government agencies should review their compliance with the current Commonwealth Fraud Control Framework.

 

Author 
Russell Wilson | Special Counsel
T +61 2 6120 4839
E russell.wilson@maddocks.com.au

[1] The Australian Financial Review, 31 January 2018, page 8.

[2] See https://www.transparency.org/news/feature/corruption_perceptions_index_2016

[3] See http://www.tai.org.au/content/corruption%E2%80%99s-723-billion-hit-gdp

[4] Commonwealth Fraud Control Framework: https://www.ag.gov.au/CrimeAndCorruption/FraudControl/Documents/CommonwealthFraudControlFramework2017.PDF

[5] Based on fraudulent conduct offences under part 7.3 of the Criminal Code and other relevant offences under chapter 7 of the Criminal Code.

[6] Public Governance, Performance and Accountability Rule 2014, section 10.

[7] Section 53(4) Public Interest Disclosure Act 2013

[8] Item 3(b) of the definition of disclosable conduct in section 29(1) of the Public Interest Disclosure Act 2013.

[9] Section 21 of the Public Governance, Performance and Accountability Act 2013 requires the accountable authority of a non-corporate Commonwealth entity to govern the entity in a way that is not inconsistent with the policies of the Australian Government.