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Red flags for internal fraud

In 2016–17, 27 Commonwealth entities finalised 2,371 internal fraud investigations. Of these investigations, 1,786 (75%) were substantiated as internal fraud incidents (page xii).

Between 2015–16 and 2016–17, the number of investigations that involved internal fraud increased by 89.9%. (page 66). 

Australian and international research has shown that government officers who have committed fraud share some common traits.

Red flags

The following list provides examples of factors that may indicate an employee presents an internal fraud risk.

The observation of just one of these red flags is not a reliable indicator of fraud; a combination of these red flags could indicate that the individual may present a higher risk of fraud or corruption:

  • Unwillingness to share duties and/or take leave
  • Replacing existing suppliers with suppliers that have an unusually close connection
  • Refusal to implement internal countermeasures (e.g. skipping approvals steps)
  • Living a lifestyle above apparent means or lavishing gifts on colleagues
  • Failure to keep appropriate or accurate records/receipts
  • Bullying colleagues
  • Seeking access to areas which the officer should not be able to access
  • Chronic shortage of cash/financial hardship – consistently seeking loans or advances
  • Past legal/compliance programs
  • Addiction problems (e.g. gambling)
  • Significant personal stress
  • Strong sense of entitlement
  • Disgruntled with employer.

In addition to these red flags, some activities have a higher inherent internal fraud risk, such as:

  • Accounts payable
  • Cash handling
  • Pre-payments
  • Travel and subsistence payments
  • Works contracts
  • Activities requiring access to sensitive data
  • Grant programs.

Key tips to prevent internal fraud

Explore further measures and strategies to help you prevent internal fraud.

Further reading

Back to better practice overview


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