Serious Fraud Office: ‘Billions in public funds likely lost to fraud’

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“We know about that little bit above the water, but we know that what’s below the water line…is much greater…”

Serious Fraud Office CEO Julie Read, in an interview with RNZ, has issued a warning that up to five percent of all government funding – including that for councils, commissions and government-funded trusts – is potentially being obtained or used fraudulently.

With a total expenditure of $99.8b that would put the figure somewhere in the ballpark of up to NZ$5b.

“That’s…a very substantial amount of money,” says Read. “Enough to pay for the SFO a couple of times over”.  

Read’s likely on the money here. UK estimates into public sector fraud suggest that between 0.5 percent to five percent of all government spending is lost to fraud.

There’s little reason to expect that New Zealand’s performance would be much better.

In 2016 it was discovered that former employees of Auckland Transport has been accepting bribes to the value of $1m, which resulted in the jailing of two fraudsters – Stephen Borlase and Murray Noone – and the dismissal of another six. The SFO condemned the “toxic culture” in the organisation that had allowed the fraudsters to thrive. 

While Read refused to name likely current offenders, she asserted that more cases would “definitely” come to light, and urged public sector agencies and organisations to strengthen their oversight processes.

“We know about that little bit above the water, but we know that what’s below the water line…is much greater.”

“What we’re aiming to do, is not to slow down the payment of money to those who need it, but to establish systems that can help prevent money being paid when it shouldn’t.”


Image: SFO CEO Julie Read

Over the course of 2017/2018, 43 defendants appeared before the Courts in prosecutions brought by the SFO, representing a total of $188 million in alleged fraud value. Those losses are in line with estimates for the private sector. An international study undertaken by the Association of Certified Fraud Examiners estimated that an average of five percent of revenue is typically lost each year to fraud. The 2014 PwC Global Economic Crime Survey found that nearly 50 percent of respondents across all sectors said they had been victims of economic crime.

While no sector appears immune to fraud, there are ways to manage the risk. Research also shows that 50 percent of organisations with an anonymous independent hotline experience an increase in detected dishonest behaviour with almost 40 percent of employers discovering fraudulent activity via just such a hotline.

To download a free eBook out more about implementing ethics reporting systems, click here.

Read the Serious Fraud Office’s Annual Report 2018.

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