Public sector fraud to rise due to staff cuts

Ability to audit fraud risk decreased by public sector staff cuts, says PwC

A report by professional services firm PricewaterhouseCoopers (PwC) points to rising public sector fraud in the UK, as a result of the upcoming budget cuts in those organisations.

The report, Fraud in the Public Sector, says public sector staff reductions would result in "fewer resources being deployed on internal controls – increasing fraud risk ".

PwC points to 31 per cent of fraud in the public sector being detected by internal tip-offs, while the majority of frauds in the private sector "are uncovered by internal audit and fraud risk management".

PwC said: "In our experience, the private sector has shown that the effective use of these tools can be an important part of the fight against fraud."

The headline figures in its report show that 52 per cent of public sector organisations experienced economic crime in the past year, with 41 per cent of respondents pointing to the risk of job loss as the primary incentive to commit fraud.

The way detected fraud is handled could also increase fraud later, explained PwC, especially if organisations are reluctant to bring charges against employees because of the time and costs associated with developing a case.

"This sends out the wrong message," said PwC, adding, "the tone from the top should make clear that these activities will not be tolerated once discovered, and appropriate action will be taken."

Government bodies also need to communicate better and share information about managing fraud.

Government departments should be more joined up, noted PwC, "so when people transfer departments, appropriate information can be shared about them."

The fifth PwC Global Economic Crime Survey was conducted between July and November 2009, with 3,037 respondents completing the online questionnaire. Some 177 were from government and public sector organisations.