An integral part of developing a strong counter fraud culture is accepting that fraud can happen to any entity and acknowledging that you cannot prevent all fraud. Concentrating efforts on the development of a counter fraud culture that emphasises prevention is one of the most effective ways of managing fraud risks.
Another important factor in effectively preventing and detecting fraud is an organisational culture based on sound ethics and integrity. Fostering an ethical culture encourages all officials to play their part in protecting public resources.
Accountable authorities play a key role in setting the ethical tone within their entities, to foster and maintain a culture of fraud awareness and prevention. Accountable authorities are strongly encouraged to foster this culture in their senior leadership, as well as across staff.
What ethical standards are required for Commonwealth employees?
The Public Governance Performance and Accountability Act 2013 (Cth) (PGPA Act) and the Public Service Act 1999 (Cth) (Public Service Act) provide a legislative basis for an ethical culture within the Commonwealth public sector.
The PGPA Act establishes a number of general duties on officials:
- to exercise care and diligence;
- to act in good faith and for a proper purpose; and
- disclose details of any material personal interest that relates to the affairs of the entity (Sections 25, 26 and 29).
Further, an official must not:
- improperly use his or her position to gain an advantage for himself or herself or any other person, or cause detriment to the Commonwealth entity, the Commonwealth or any other person (section 27); or
- improperly use information obtained as an official to gain an advantage for himself or herself or any other person, or cause detriment to the Commonwealth entity, the Commonwealth or any another person (section 28).
The APS Values and APS Employment Principles are described in sections 10 and 10A of the Public Service Act. The Values and Principles embody good public administration and shape the organisational culture of the APS. The Public Service Act requires that at all times, members of the APS behave in a way that upholds the APS Values and Employment Principles and the integrity and good reputation of the APS. The APS Values require members of the APS to be committed to public service, ethical, respectful, accountable, and impartial.
APS Code of Conduct: The APS Values and Employment Principles are complemented by the requirements of the APS Code of Conduct, which is set out in section 13 of the Public Service Act. Among other things, the APS Code of Conduct requires that members of the APS:
- behave honestly and with integrity;
- take reasonable steps to avoid conflict of interest (real or apparent), and disclose details of material personal interests;
- use Commonwealth resources in a proper manner and for a proper purpose; and
- not improperly use inside information or their position to gain, or seek to gain, a benefit or advantage for themselves or others.
Note — some exemptions: The Public Service Act applies to most non-corporate Commonwealth entities and some Corporate Commonwealth entities (see the PGPA Act flipchart). For entities that don't engage staff under the Public Service Act, alternative legislation may apply. For example, the Parliamentary Services Act 1999 (Cth) provides a code of conduct for Parliamentary Service employees. The Australian Federal Police and the Australian Security Intelligence Organisation have also developed codes of conduct for their officials.
Creating an effective counter fraud culture in an organisation
A code of conduct is integral to establishing an ethical culture within an entity. Where the APS Code of Conduct does not apply to an entity's officials, entities can develop a code of conduct that suits their needs and covers issues unique to their entity. It is good practice for a code of conduct to be promoted throughout the entity and to form part of the entity's culture.
Creating a culture in which employees are prepared and supported to report suspected fraud is critical for the ongoing effectiveness of an entity's counter fraud activities. Additionally, build and maintain a culture that finding fraud is positive; if you don't find fraud you can't fight it. This requires a change in perspective so the identification of fraud is viewed as a positive and proactive achievement (International Public Sector Fraud Forum, 2019).
In 2019, the Australian Institute of Criminology concluded that:
Although the detection of fraud is often associated with negative attention and criticism from the public, media and ministers, the failure to detect fraud is arguably worse. The absence of fraud does not necessarily mean that fraud is not present, and the failure to detect fraud early can lead to greater losses, more reputational damage and a toxic workplace culture.
In 2016–17, there were 81 entities in which either fraud was not detected or fraud investigations were not finalised in 2016–17. It is not known whether this means that fraud occurred in these entities but was not detected or that these entities did not experience fraud. Comparable international research would suggest, however, that it is unlikely fraud was not present at all.
- Ensure adequate consideration of ethical standards in induction and ongoing staff training, and performance management of staff
- Champion adherence to the organisation's code of conduct and ethics, and ensure its availability to staff, contractors and consultants
- Create appropriate governance and reporting arrangements so that fraud tolerance, countermeasure effectiveness and fraud incidents are discussed at executive-level committee/s
- Designate an individual who is accountable for fraud and corruption at an executive/senior management level. Choose an influential person who understands fraud and corruption, and how it is evolving, and is responsible for the organisation's response (a functional lead or fraud manager)
- Assign ownership of key fraud risks and mitigation strategies
- Ensure all staff have an awareness of fraud and corruption (appropriate to their role), including how to identify and detect it
- Staff are surveyed to check awareness and application of the counter fraud training, and to give staff an additional opportunity to report any concerns
- Create a culture that allows employees to speak freely about pressures, providing management the opportunity to alleviate such pressures before they become acute
- Advertise the processes in place that enable staff to safely report concerns about internal fraud (tip-offs and whistleblowing)
- Ensure there are processes in place for reporting conflict of interest and a gifts/benefit register
- Where appropriate, communicate the results of fraud investigations to raise awareness of the entity's active management of fraud risk and corrective action
- Consider if the entity's ethical standards are appropriately reflected when entering into arrangements with third parties to deliver services or programs on behalf on the Australian Government.
- PGPA Act 2013
- Public Service Act 1999
- APS Values
- APS Employment Principles
- APS Code of Conduct
- International Public Sector Fraud Forum, A Guide to Managing Fraud for Public Bodies (February 2019)
- AIC, Commonwealth Fraud Investigations 2016–17 (July 2019), (see: 'Detecting Fraud, page 66)
- ACFE, Hotlines and reporting mechanisms (2019).