PwC Reports Increase in Public Sector Fraud

Public sector fraud is on the rise globally, with organisations particularly at risk of being defrauded by their own employees and their suppliers, according to research by PwC.

The firm’s latest Global Economic Crime Survey reveals that 46% of respondents from government and public sector organisations had experienced one or more incidents of economic crime in the last 12 months. This compares with 37% in 2009 when the survey was last carried out and is well above the average of 34% across all sectors.

The survey, which is based on the views of over 180 respondents from public sector organisations in 36 countries, found that almost all types of fraud are on the increase, including asset misappropriation, accounting fraud and bribery and corruption.

Asset misappropriation is the commonest type of fraud, suffered by 75% of respondents. Cybercrime, which was previously statistically insignificant, is now identified as a growing threat with 14% of respondents reporting an attack, 28% thinking that they are likely to suffer a cybercrime attack in the next 12 months and over 40% believing the risk of cybercrime to be on the rise.

The survey also shows that over two-thirds of the economic crimes experienced in the last 12 months have been committed by public sector employees, compared to just over half in 2009.

Supplier fraud has increased as well, accounting for 32% of all frauds committed by external parties, up from 13%.

PwC says feedback from clients indicates that false invoicing schemes and requests for unauthorised changes of supplier details are on the rise, and says one reason for the increase in supplier fraud may be that public sector organisations are continuing to maintain business relationships with third parties that have defrauded them. Only a quarter reported terminating the relationship after the discovery of an incidence of fraud, compared to nearly half in the private sector.

Ian Elliott, partner, forensic services, PwC, said: ‘As the public service market becomes more open in many countries, more diverse suppliers, and more voluntary and private sector organisations become involved in delivering services, procurement departments will also face a whole raft of new challenges to ensure that the quality and cost-efficiency of the services being delivered are not compromised.’