Fraud prevention strategies in local government

Australia Victoria

This audit assessed the effectiveness of fraud prevention strategies at a selection of Victorian councils.

Each year, local government collects $7 billion in operating revenues, expends $6 billion, and manages assets with a total value of $60 billion. These significant resources are at risk if councils are not active, vigilant and effective in dealing with the risk of fraud.

The examined councils do not effectively manage their exposure to fraud risk as none have developed a strategic and coordinated approach to controlling fraud. This is concerning given the significant value of the public funds and assets they manage.

While each of the five councils has aspects of a fraud control framework, critical elements are either absent or poorly implemented. Risk-based fraud control plans do not yet exist at all councils. Coupled with inadequate monitoring of the fraud control framework by management and audit committees, this shows they are not sufficiently vigilant nor effective in dealing with the risk of fraud.

Without a risk-based fraud control plan there is no formal basis to assess whether fraud strategies are soundly based, coordinated, purposely implemented and reviewed.

These shortcomings increase opportunities for fraud and thus put councils' reputations and limited public funds at risk.

Consequently, the examined councils cannot be assured that their fraud prevention strategies are effective and that all major fraud risks have been adequately mitigated.

Councils, therefore, need to take the issue of fraud more seriously.

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