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Trends in suspected fraud

This section presents data on entities’ experience of fraud during the three years examined, in terms of the location of suspects, within or external to entities, the size of entities, the number of incidents detected and suspects involved. Internal fraud was defined as any incident of suspected fraud allegedly committed by an employee or contractor, while external fraud was defined as any incident of suspected fraud allegedly committed by a person other than an employee or contractor of the entity. Collusion occurred when an employee or contractor was alleged to have acted together with an external party in perpetrating fraud.

Experience of fraud

Over the last three financial years, 2010–11 to 2012–13, the percentage of Commonwealth entities experiencing fraud has remained relatively stable, varying from 40 percent in both 2010–11 and in 2012–13, to 43 percent in 2011–12 (see Table 1 and Figure 1). This stability related to the proportion of entities experiencing both suspected internal, as well as external fraud incidents, with the same largest entities reporting the vast majority of cases of external fraud. In addition, there were few changes in the small number of entities reporting collusion between staff and external parties in connection with suspected fraud.

Table 1 Entities experiencing fraud, 2010–11 to 2012–13
Year Respondents No fraud experienced Fraud experienced Internal fraud External fraud Collusion Entities experiencing both types of fraud
N N % N % N N N N
2010–11 154 93 60 61 40 48 42 6 29
2011–12 155 88 57 67 43 44 45 4 23
2012–13 162 98 61 64 40 45 48 5 29

Source: Commonwealth fraud survey 2010–11, 2011–12 and 2012–13 [AIC computer file]

Figure 1 Entities experiencing fraud by type, 2010–11 to 2012–13 (%)

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Note: Total percentages exclude ‘both fraud types’ category

Source: AIC Commonwealth fraud surveys 2010–11, 2011–12, and 2012–13 [AIC computer file]

Extent of fraud

By way of contrast, there were wide fluctuations in the number of incidents identified by entities each year, as shown in Table 2. These variations were largely due to changes in the ways in which some entities classified and counted external fraud incidents each year.

Table 2 Incidents involving internal and external fraud, collusion and unclassified incidents (N)
Year Solely internal fraud Solely external fraud Collusion Unclassified Total
2010–11 3,828 87,207 9 48 91,092
2011–12 2,296 36,759 35 12 39,102
2012–13 1,685 133,969 17 1 135,672

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

Entities’ experience of fraud varied in terms of the number of staff employed, with entities with more than 1,000 staff experiencing more fraud than smaller entities with 500 or fewer staff (see Figure 2 and Table 3). The lowest numbers of suspected fraud incidents were experienced by medium-sized entities with between 501 and 1,000 staff. The relationship between entity size and experience of fraud accords with similar findings of business fraud victimisation surveys generally. For example, in 2011, PricewaterhouseCoopers (2012) in its Global Economic Crime Survey also found that larger organisations tended to experience more incidents of fraud. It found that 54 percent of respondent organisations that employed more than 1,000 employees had experienced fraud incidents in the preceding 12 months. This compares with the current findings that 48 percent of respondents experiencing Commonwealth fraud had more than 1,000 staff in 2012–13. PricewaterhouseCoopers (2012) argued that larger organisations were likely to be targeted because of their increased assets, more extensive business dealings and international operations. They might also be in a better position to detect fraud owing to more resources being devoted to fraud control and risk management.

Figure 2 Entities experiencing fraud by size, 2010–11 to 2012–13 (%)

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Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

Table 3 Entities that experienced fraud by entity size and year
Staff (N) 2010–11 (N=154) 2011–12 (N=155) 2012–13 (N=162)
N % N % N %
0–500 20 32.8 26 38.8 21 32.3
501–1,000 13 21.3 13 19.4 13 20.0
≥1,001 28 45.9 28 41.8 31 47.7
Total 61 100.0 67 100.0 65 100.0

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

Internal fraud trends

While the number of entities reporting internal fraud remained relatively stable (ranging from 44 to 48 entities), the number of incidents reported declined over the three years, with a 56 percent reduction in internal fraud incidents between 2010–11 and 2012–13 (see Table 4). This was largely due to a small number of entities reporting large reductions. Indeed, the highest number of internal fraud incidents reported by any one entity in 2010–11 was 2,059. In 2012–13, this figure declined to 633 incidents (see Table 4). Arguably, this reduction may have been due to enhanced fraud control procedures within entities, or the use of specialised fraud detection analytics in some years by some large entities.

Table 4 Internal fraud summary results
Year Entities (N) Total incidents (N) Mean incidents (N) Median incidents (N) Range for incidents (N)
2010–11 48 3,828 80 3 1–2,059
2011–12 44 2,296 52 3 1–946
2012–13 45 1,685 37 5 1–633

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

Figure 3 shows that there was a corresponding reduction in the number of internal fraud suspects, declining by 60 percent over the three year period. However, the ratio of incidents to suspects remained constant, with 1.2 incidents per suspect in 2010–11 and 1.3 incidents per suspect in both 2011–12 and 2012–13.

Figure 3 Internal fraud incidents and suspects, 2010–11 to 2012–13 (N)

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Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

External fraud trends

As with internal fraud, the number of entities reporting external fraud remained relatively stable, ranging from 42 to 48 entities. By contrast with internal fraud, there was a 54 percent increase in external fraud over the three year period. However, the difference resulted almost entirely from one entity reporting an additional 97,000 suspected incidents due to a change in the way it reported external fraud (see Table 5).

Table 5 External fraud summary results
Year Entities (N) Total incidents (N) Mean incidents (N) Median incidents (N) Range for incidents (N)
2010–11 42 87,207 2,076 13 1–30,080
2011–12 45 36,759 817 13 1–30,748
2012–13 48 133,969 2,791 9 1–97,216

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

The increase in the number of reported external fraud incidents was not matched by an increase in the number of suspects (see Figure 4). As a result, the ratio of incidents to suspects ranged from 1.7 incidents per suspect in 2010–11 to 1.1 in 2011–12 and 3.8 in 2012–13.

Figure 4 External fraud incidents and suspects, 2010–11 to 2012–13 (N)

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Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]