Public sector fraud on the rise
FINANCIAL crime in public sector organisations has increased as cuts in public spending has led to increased scrutiny of where money is being spent, according to a new survey.
Accountancy firm PwC said that some 60% of public sector organisations experienced some form of fraud in 2010 – up from 52% in 2009. The report also found that fraud committed by staff and internal members of an organisation are now more common than external frauds.
It blamed the deterioration in industrial relations as a factor, with loyalty and employee engagement being eroded by redundancy announcements and pay freezes. In such scenarios, there is an increased risk of some employees (and indeed sub-contractors) maximising their benefits on the way out through fraud, PwC said.
Will Richardson, a director in PwC’s forensic accounting team in the North West, said: “Spending cuts have created ill-will among public employees in some areas and, in others, more opportunities for government workers to cross the line.”
Some 74% of the 110 senior figures from within government and state-owned enterprises said that they believed the spending review has increased the risks of economic crime, with accounting fraud – such as unauthorised payments – becoming more common than asset misappropriation.
“More opportunities for fraud are created as mid-office functions are stripped away and responsibility for auditing and authorising activity is spread more thinly,” said Richardson.
