FRAUD CONTROL PLAN

Introduction

The vast majority of DoCS employees, clients and service providers act ethically.

However, fraud affects all large organisations.

This Fraud Control Plan has been developed to raise awareness of fraud at work. It aims to help staff and other people who deal with DoCS to prevent, detect and report suspected fraud.

DoCS does not tolerate or condone fraudulent conduct.

In keeping with our Code of Conduct and Ethics all staff need to be aware of their responsibility to foster and develop the highest standards of integrity and promote an ethical workplace culture.

Definition of Fraud

The NSW Audit Office defines fraud as a deliberate and premeditated act which involves using deception to gain advantage from a position of trust and authority.

(Fraud is actually one type of corrupt conduct. Broadly, corrupt conduct is defined as the conduct of any person that could adversely affect the honest and impartial exercise of official functions by a public official).

Fraudulent acts may involve theft, the making of false statements, evasion, the manufacturing of information or acts of omission.

Examples of Fraud

• unauthorised private use of motor vehicles
• using client money for private benefit
• inappropriately manipulating foster care allowance payments

• falsifying travel claims or cab charge vouchers

• falsifying timesheets
• conspiring unfairly with others to get a tender

• running a private business in working hours

• stealing equipment or supplies from work

• accepting bribes or favours to process a licence for a child care centre that does not meet licensing requirements

• accepting bribes or favours for turning a blind eye to a service provider who does not provide an appropriate service

• as a contractor, sending false invoices

• as an employee of a service provider (eg a child care centre):
• failing to send bills for services provided to clients who are relatives or friends.
• misappropriating fees received from clients, and avoiding detection by not issuing receipts to those clients.

The Fraud Problem

Fraud can weaken any organisation and hurt individuals, workmates, friends, families and clients. It affects our morale, reputation and professionalism.

Fraud wastes resources, not only through the fraud itself, but also the time and effort spent dealing with its consequences.

Fraud can:

• erode confidence in the Department
• deprive clients of their resources (e.g. a service provider’s employee who misappropriates funds intended to provide a service to a disadvantaged section of the community)
• reduce the effectiveness of Departmental assets and equipment (e.g. a DoCS employee who inappropriately obtains exclusive use of a Departmental vehicle intended for general service of clients, and uses it for personal trips)

• harm clients (e.g. a DoCS employee responsible for child care licensing who accepts favours from a centre and turns a blind eye to unsafe practices)

• damage staff morale.

Fraud is also a crime under the Crimes Act 1900.

Fraud against the government may be perpetrated by both government employees and people outside the public sector.

DoCS has an obligation not only for good stewardship of our own expenditure and assets but also to ensure that funds allocated to our service providers are spent appropriately and in the best interests of our clients.

The Fraud Control Plan outlines the framework for DoCS’ approach to the prevention, detection, reporting and handling of fraud in the workplace.

PREVENTION

Management and Staff Responsibilities

DoCS does not tolerate or condone fraudulent conduct.

The most effective weapon against fraud is a well-informed workforce, prepared to disclose corrupt behaviour.

The Code of Conduct and Ethics encourages staff to report all incidents of suspected corrupt conduct (including fraud), misconduct, serious mismanagement or substantial waste of public resources.

DoCS’ managers are expected to create and promote an ethical workplace culture. They can best do this by ensuring that they themselves always act ethically and follow correct procedures.

Managers are required to assess the risk of fraud occurring in their areas and implement appropriate controls. They should ensure that fraud measures are updated as work places change and that staff understand their individual responsibilities in preventing fraud.

Management and staff need to work together to establish an ethical and effective workplace which can identify and implement fraud prevention and control measures.

Fraud Risk Assessment

A fraud risk assessment measures the vulnerability of an organisation to fraud and is essential for fraud prevention and control. The Assessment that was completed by all DoCS units in 2002 has been updated in 2005. It is now titled Guide to Fraud Risk Assessment and has easily-understood directions. The Guide should be regularly revisited by all unit managers.

Specifically, the purpose of the Assessment is to:

• define the Department’s fraud risk profile
• determine the effectiveness of existing control measures
• enable judgements to be made on any required fraud counter-measures.

Where fraud risk ratings are assessed as high for particular controls, strategies need to be put in place to address the risk.

The fraud risk assessment process does not replace existing manuals or procedures, but is additional and complementary.

Another document entitled Fraud Risk Assessment for Service Providers has adapted the DoCS Assessment to the particular needs and circumstances of our service providers. It assists service providers to identify and address fraud risks within their own organisations. Regional staff who deal with service providers are encouraged to regularly bring this document to the attention of the service providers.

DETECTION

Good Controls

Fraud can be detected by establishing effective accounting and system controls and by recognising variations from standard practice.

DoCS’ employees are important in detecting fraud because of their detailed knowledge of work practices and accountabilities. Staff cooperation and initiative prevents and detects a significant amount of fraud.

Fraud Signals

Managers and staff should be alert to the common signs of fraud. Signals for potential fraud include:

• illogical excuses and reasons for unusual events or actions
• senior staff involved in routine process work such as purchasing, ordering and receiving of goods

• staff evidently living beyond their means, who have access to funds or control or influence over service providers
• excessive staff turnover

• staff who do not take holidays for extended periods

• potential conflicts of interest not declared

• excessive number of duties (eg. both processing and approving the same transaction) residing with one person
• undue secrecy, or excluding people from available information
• staff who treat controls and standard practice as challenges to be overcome or defied

• evidence of failure to conduct reference checks on staff prior to employment
• unauthorised changes to systems or work practices
• missing documentation relating to client or agency financial transactions
• “blind approval,” where the person signing does not sight supporting documentation
• duplicates only of invoices
• alterations of documents such as day books, log books and time sheets.

REPORTING

Where to Report

You should report any suspicions of fraudulent behaviour first to your line manager, or alternatively to:

• Your Regional or Executive Director, the Director-General or any of the people listed in the Protected Disclosures policy
• Client Feedback and Assistance

• the Independent Commission Against Corruption, Audit Office of NSW, NSW Ombudsman or the Police.

You should report your suspicions to only those people who absolutely need to know. This protects people from allegations that may not be proven and prevents the possible destruction of evidence.

Protected Disclosures

If you report suspected corrupt conduct through the appropriate channels, as set out above, you will be protected from detrimental action by the Protected Disclosures Act 1994. This Act provides the framework for the protection of government employees who report corrupt conduct.

Information received as a protected disclosure is strictly confidential, and includes the:

• identity of the person making the disclosure
• nature of the disclosure
• identity of the person or persons against whom the disclosure has been made.

Consequently, employees wishing to report fraud are encouraged NOT to make anonymous complaints.

HANDLING

Investigating fraud

Investigations into alleged fraud will be conducted according to natural justice principles, which means people subject to the allegations:

• are presumed to be innocent until proven guilty

• have a right to respond to allegations and to be represented during any formal disciplinary proceedings.

The Fraud Control Plan is supported by the DoCS’ Code of Conduct and Ethics. The principles outlined in the Code encourage an ethical climate where all staff protect public funds and property and report any corrupt behaviour. Staff alleged to have committed fraud may expect to face disciplinary procedures under the Public Sector Employment and Management Act 2002.

DoCS Corporate Human Resources is responsible for initiating investigations into allegations of suspected fraud that concern DoCS staff. This is arranged through the appropriate delegate who is either the Director-General or one of the two Deputy Directors-General. Professional investigators are usually hired for this purpose. The conduct of disciplinary procedures is guided by the expertise of Corporate Human Resources, and Premier’s Department Procedures for Dealing with Misconduct as a Disciplinary Matter.

Where particular forensic or financial skills are required, the Department’s contracted internal audit firm can be used.

Fraud alleged to have occurred in connection with service providers is closely monitored by the appropriate Region.

DoCS Internal Audit Committee actively monitors instances of fraud.

Advice to Line Managers

Fraud or suspected fraud can cause stress and disruption in the workplace. Information on fraud investigations should be on a strict “need to know basis”.

Who needs to know will vary from case to case. Often, people in a work area will not even know an investigation is occurring. As a line manager, you should not promote or tolerate idle gossip. You or others may be required to give evidence, and evidence based on gossip rather than fact can impede an investigation.

Briefing staff after an investigation can be positive and improve morale. A useful source of information on how to manage a workplace during a corruption investigation is the ICAC publication “Managing an organisation through an ICAC investigation: practical advice for management”.